LASER STORM, INC.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LASER STORM, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)() and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LASER STORM, INC.
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on August 15, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Laser Storm, Inc., a Colorado corporation (the "Company"), will be
held at Laser Storm of Arapahoe Village, 5150 East Arapahoe Road, Littleton,
Colorado 80122, on August 15, 1997, at 9:00 a.m. Mountain Time, for the purpose
of considering and voting upon proposals to:
(1) Elect three directors to serve until the next Annual Meeting of
Stockholders;
(2) Approve the 1996 Incentive and Nonstatutory Stock Option Plan;
(3) Adopt an amendment to Article II of the Company's Restated Articles of
Incorporation With Amendments to add paragraph 7 which specifically
provides that the Company's shareholders do not have preemptive rights
to acquire unissued shares of the Company; and
(4) Transact such other business as may lawfully come before the Meeting.
Only stockholders of record at the close of business on June 13, 1997, are
entitled to notice of and to vote at the Meeting, and at any adjournment
thereof.
The enclosed Proxy is solicited by and on behalf of the Board of Directors of
the Company. All stockholders are cordially invited to attend the Meeting in
person. Whether you plan to attend or not, please date, sign and return the
accompanying proxy in the enclosed return envelope, to which no postage need be
affixed if mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT J. COONEY,
CHAIRMAN OF THE BOARD
Denver, Colorado
July 21, 1997
<PAGE>
LASER STORM, INC.
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 15, 1997
This proxy statement ("Proxy Statement") is being furnished in connection
with the solicitation of proxies by the Board of Directors of Laser Storm, Inc.
(the "Company") to be used at the Annual Meeting of Stockholders (the "Meeting")
to be held at Laser Storm of Arapahoe Village, 5150 East Arapahoe Road,
Littleton, Colorado 80122, on August 15, 1997, at 9:00 a.m. Mountain Time, and
at any adjournment thereof.
It is planned that this Proxy Statement and the accompanying Proxy will be
mailed to the Company's stockholders on or about July 21, 1997.
Any person signing and mailing the enclosed Proxy may revoke it at any time
before it is voted by (i) giving written notice of the revocation to the
Company's corporate secretary; (ii) voting in person at the Meeting; or (iii)
voting again by submitting a new proxy card. Only the latest dated proxy card,
including one which a person may vote in person at the Meeting, will count.
ACTIONS TO BE TAKEN AT MEETING
The Meeting is called by the Board of Directors of the Company (the
"Directors") to consider and act upon the following matters:
(1) The election of three directors of the Company;
(2) The adoption of the 1996 Incentive and Nonstatutory Stock Option Plan;
(3) The adoption of an amendment to Article II of the Company's Restated
Articles of Incorporation With Amendments to add paragraph 7 which
specifically provides that the Company's shareholders do not have
preemptive rights to acquire unissued shares of the Company; and
(4) Such other business as may properly come before the Meeting or any
adjournment thereof.
The holders of one-third of the outstanding shares of Common Stock of the
Company, present at the Meeting in person or represented by proxy, shall
constitute a quorum. If a quorum is present, directors are elected by a
plurality of the vote, i.e., the candidates receiving the highest number of
votes cast in favor of their election will be elected to the Board of Directors.
The 1996 Incentive and Nonstatutory Stock Option Plan and the amendment to the
<PAGE>
Restated Articles of Incorporation With Amendments will be approved and adopted,
respectively, if a quorum exists and if the votes cast for approval and
adoption, respectively, exceed the votes cast against approval and adoption,
respectively. Where brokers have not received any instruction from their clients
on how to vote on a particular proposal, brokers are permitted to vote on
routine proposals but not on nonroutine matters. The absence of votes on
nonroutine matters are "broker nonvotes." Abstentions and broker nonvotes will
be counted as present for purposes of establishing a quorum, but will have no
effect on the election of directors. Abstentions and broker nonvotes on
proposals other than the election of directors, if any, will be counted as
present for purposes of the proposal and will have the effect of a vote against
the proposal.
VOTING SECURITIES
Voting rights at the Meeting are vested in the holders of the Company's
$0.001 par value common stock (the "Common Stock") with each share entitled to
one vote. Cumulative voting in the election of directors is not permitted. Only
holders of record of the Common Stock at the close of business on June 13, 1997,
are entitled to notice of and to vote at the Meeting or any adjournments
thereof. On June 13, 1997, the Company had 3,824,836 shares of Common Stock
outstanding.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Effective at the Meeting, the number of directors on the Company's Board of
Directors has been established by resolution of the Board of Directors as three
directors. The terms of all of the current directors expire at this Meeting.
The persons named in the enclosed form of Proxy will vote the shares
represented by Proxies received by them for the election of the three nominees
for director named below. If, at the time of the Meeting, any of these nominees
shall become unavailable for any reason, which event is not expected to occur,
the persons entitled to vote the Proxies will vote for such substitute nominee
or nominees, if any, as they determine in their sole discretion. If elected,
Robert J. Cooney, John E. McNutt and William R. Bauerle will hold office until
the next annual meeting of stockholders or until their successors are duly
elected or appointed. The nominees for director, each of whom has consented to
serve if elected, are as follows:
2
<PAGE>
<TABLE>
<CAPTION>
Name and Director
Nominee Since Age Principal Occupation for Last Five Years
- -------- -------- --- ----------------------------------------
<S> <C> <C> <C>
Robert J. Cooney 1990 33 Chairman of the Board and Chief Executive
Officer of the Company since March 1990,
President and Secretary of the Company since
June 1997 and the Treasurer of the Company
from October 1994 to February 1997. President
of the Company from February 1992 to April
1994.
John E. McNutt 1997 40 Chief Financial Officer, Treasurer and a
director of the Company since February 1997
and was Vice President of Finance of the
Company from July 1996 to February 1997.
Associated with CAIRE, Inc., formerly
Mountain Medical Equipment, Inc., a
manufacturer and seller of home health care
respiratory equipment, from 1981 to July
1996, where Mr. McNutt served in various
capacities including corporate controller and
Vice President of a subsidiary, Mountain
Medical Leasing Co.
William R. Bauerle 1994 46 From 1985 to the present, President and a
director of Asset Development Corporation, a
business consulting firm. President and Chief
Operating Officer of the Company from April
1994 to July 1997, Secretary of the Company
from July 1994 to July 1997, and a director
of the Company since July 1994.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF THE
NOMINEES LISTED ABOVE.
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, outstanding as of June 13, 1997, by (i)
each person who owned of record, or who is known to the Company to own
beneficially, more than 5% of the outstanding Common Stock with the address of
each such person, (ii) each of the Company's directors and executive officers
and (iii) all of the Company's executive officers and directors as a group.
3
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Amount and Nature of Percent of
or Name of Director or Executive Officer Beneficial Ownership(1) Class(2)
- ---------------------------------------- ---------------------- ----------
<S> <C> <C>
Robert J. Cooney ...................................... 841,800 22.0%
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
John E. McNutt ........................................ 75,000(3) 1.9%
Frank J. Ball ......................................... 76,250 2.0%
William R. Bauerle .................................... 76,250(4) 2.0%
Harold Skripsky ....................................... 50,000(5) 1.3%
All Executive Officers and Directors .................. 1,119,300(6) 28.0%
as a Group (5 Persons)
Edward J. Bonis ....................................... 411,750 10.8%
7808 Cherry Creek South Drive, Unit 301
Denver, Colorado 80231
- -----------------
</TABLE>
(1) The beneficial owners listed have sole voting and investment power with
respect to the shares of Common Stock.
(2) Assumes the stock option of each person who has a stock option is
exercised whether or not the stock option is vested.
(3) Consists of 75,000 shares of Common Stock underlying stock options,
none of which are exercisable until August 1997.
(4) Does not include 75,000 shares of Common Stock underlying stock options
that expired on June 30, 1997, when Mr. Bauerle terminated his employment with
the Company. On June 13, 1997, options relating to 50,000 shares were
exercisable.
(5) Consists of 50,000 shares of Common Stock underlying a stock option,
37,500 of which are currently exercisable and 12,500 of which are not
exercisable until October 1997.
(6) Includes 175,000 shares of Common Stock underlying the outstanding
stock options described above.
EXECUTIVE OFFICERS
The executive officers of the Company are Robert J. Cooney and John E.
McNutt, information pertaining to whom is set forth above under "Election of
Directors." Each executive officer holds office until his or her successor is
duly elected and qualified or until his resignation or until he shall be removed
in the manner provided in the Company's bylaws.
4
<PAGE>
DIRECTORS MEETINGS
The Company's Board of Directors held 21 meetings during the Company's last
fiscal year ended December 31, 1996. Fourteen of such meetings consisted of
consent directors minutes signed by all directors and seven of such meetings
were actual meetings at which all of the directors were present in person or by
telephone. The Board of Directors currently has no standing audit, nominating or
compensation committees or committees performing similar functions. No current
director attended less than 75% of the aggregate of all board of director
meetings and all committee meetings on which he served during the fiscal year
ended December 31, 1996.
There was no arrangement or understanding between any director or executive
officer and any other person pursuant to which any person was selected as a
director.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers and persons who beneficially own more than
10% of a registered class of the Company's equity securities to file various
reports with the Securities and Exchange Commission concerning their holdings
of, and transactions in, securities of the Company. Copies of these filings must
be furnished to the Company.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's officers and directors, the Company
believes that all of the persons who were officers or directors of the Company
during the year ended December 31, 1996, made all filings required under Section
16(a) on a timely basis during the year ended December 31, 1996, except for
James E. Johnson, a former officer of the Company, who was late in filing his
Form 3.
COMPENSATION
The following table sets forth certain information concerning the
compensation paid by the Company for services rendered in all capacities to the
Company for the fiscal years ended December 31, 1996, 1995 and 1994, to those
persons who were, at December 31, 1996 (i) the chief executive officer of the
Company and (ii) the other most highly compensated executive officers of the
Company whose annual salary and bonus from the Company exceeded $100,000 for the
fiscal year ended December 31, 1996.
5
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------------------- ------------
Securities
Name and Principal Other Annual Underlying All Other
Positions at 12/31/96 Year Salary Bonus Compensation Options Compensation
- ---------------------------------------- ---------- ------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Cooney ........................... 1996... $ 150,000 - 0 - $28,942(1) -0- None
Chairman of the Board and 1995... $ 150,000 - 0 - $24,335(1) -0- None
Chief Executive Officer 1994... $ 97,500 - 0 - $ 3,883(1) -0- None
William R. Bauerle ......................... 1996... $ 150,000 -0- $26,681(2) -0- -0-
President and Secretary 1995... $ 150,000 -0- $21,099(2) -0- -0-
until July 1997 1994... $ 71,250 -0- $ 2,934(2) 75,000(3) $21,727(4)
and Director
Eric B. Schwartzman ........................ 1996... $ 100,000 -0- $11,294(5) -0- -0-
Vice President of Marketing 1995... $ -0- -0- -0- 75,000(6) -0-
and Product Development until January 1997 1994... $ -0- -0- -0- -0- -0-
Frank J. Ball .............................. 1996... $ 120,000 -0- $12,016(7) -0- $15,238(8)
Vice President of Manufacturing, 1995... $ 95,411 -0- $ 5,685(7) -0- $14,020(8)
Executive Vice President, 1994... $ -0- -0- -0- -0- $14,000(8)
Operations and General
Counsel until December
1996, October 1996 and
October 1996, respectively,
and Director
Michael D. Kessler ......................... 1996... $ 110,000 -0- $43,571(9) -0- -0-
Vice President of Retail 1995... $ 13,749 -0- -0- 75,000(6) -0-
Operations until December 1994... $ -0- -0- -0- -0- -0-
1996
- ------------------
</TABLE>
(1) Includes amounts paid by the Company for automobile expenses ($12,159
in 1996, $8,988 in 1995 and $3,218 in 1994), health club dues ($1,490 in 1996,
$1,559 in 1995 and $665 in 1994), life insurance premiums advanced on behalf of
Mr. Cooney ($12,110 in 1996 and $12,111 in 1995) and disability insurance
premiums ($3,183 in 1996 and $1,677 in 1995). Does not include any value that
may have been realized by Mr. Cooney when he used whatever equity there was in a
Company automobile as a down payment on a personal automobile. The Company
estimates the amount of the equity to be less than $5,000.
(2) Includes amounts paid by the Company for automobile expenses ($11,637
in 1996 and $7,204 in 1995), health club dues ($250 in 1995 and $660 in 1994),
life insurance premiums advanced on behalf of Mr. Bauerle ($11,635 in 1996,
$11,635 in 1995 and $1,939 in 1994) and disability insurance premiums ($3,407 in
1996, $2,010 in 1995 and $335 in 1994).
(3) This stock option expired on June 30, 1997, when Mr. Bauerle terminated
his employment with the Company.
6
<PAGE>
(4) Represents consulting fees paid to a corporation owned by Mr. Bauerle
prior to Mr. Bauerle becoming an employee of the Company.
(5) Includes amounts paid by the Company for automobile expenses ($11,294
in 1996).
(6) These stock options expired on the date upon which Mr. Schwartzman's
and Mr. Kessler's employment with the Company terminated, which dates were
February 15, 1997 and January 5, 1996, respectively.
(7) Includes amounts paid by the Company for automobile expenses ($10,526
in 1996 and $4,605 in 1995) and health club dues ($1,490 in 1996 and $1,080 in
1995).
(8) Represents amounts paid in legal fees for services rendered by the law
firm owned by Mr. Ball.
(9) Includes amounts paid by the Company for automobile expenses ($8,742 in
1996), health club dues ($1,320 in 1996) and a commission ($33,509 in 1996).
FISCAL YEAR END OPTION VALUES
The following table sets forth information with respect to the unexercised
options held by the following persons as of December 31, 1996.
<TABLE>
<CAPTION>
Aggregate Fiscal Year End Option Values
-------------------------------------------------------------------------
Number of Securities Underlying Un- Value of Unexercised In-the-
exercised Options at Fiscal Year End Money Options at Fiscal Year
Exercisable/Unexercisable End Exercisable/Unexercisable
------------------------------------- -----------------------------
<S> <C> <C>
Robert J. Cooney............... -0- -0-
William R. Bauerle............. 50,000/25,000 $40,000/$20,000(1)
Eric B. Schwartzman............ 25,000/50,000 -0-
Frank J. Ball.................. -0- -0-
Michael D. Kessler............. 25,000/50,000 -0-
- ----------------------
</TABLE>
(1) The value is based on the closing sale price of $1.00 of the Company's
Common Stock on December 31, 1996 minus the exercise price of the options.
No options to purchase the Company's Common Stock were exercised by Messrs.
Cooney, Bauerle, Schwartzman, Ball or Kessler during the Company's fiscal year
ended December 31, 1996.
Until December 31, 1997, the Company has agreed with Laidlaw Equities,
Inc., the representative of the underwriters of the Company's initial public
offering which was completed in April 1996, that the Company will not increase,
7
<PAGE>
without shareholder approval, the compensation of Messrs. Cooney and Bauerle by
more than an aggregate of 15% per annum above current levels. Subject to the
foregoing limitations, the Company may reserve up to 10% of net pre-tax profits
over $1,000,000 for bonuses to Company executives and employees.
Compensation of Directors. During 1996, the Company paid to each of
Harrison A. Price, a former director of the Company, and Harold Skripsky, a
current director of the Company, $20,000 per year. From January 1, 1997, through
the date of the Meeting, the Company will pay $5,000 per quarter to Harold
Skripsky. In 1995, the Company also granted to each of Harrison A. Price and
Harold Skripsky an option to purchase 50,000 shares of Common Stock at $4.00 per
share. One-half of each option vested in October 1995 and one quarter of each
option vested in October 1996. One quarter of Harrison A. Price's option (i.e.,
12,500 shares) terminated when he resigned as a director of the Company in March
1997. One quarter of Harold Skripsky's option (i.e., 12,500 shares) will
terminate on the date of the Meeting. The options must be exercised within 5
years from the date of vesting. The options were not granted under the 1996
Plan, defined and described below.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements. Mr. Cooney has an employment agreement with the Company. The
employment agreement provides that Mr. Cooney will not disclose Company
confidential information and will not compete with the Company for 24 months
after termination of the agreement. Mr. Cooney's agreement was effective October
1, 1994, extends through September 10, 1998, and provides for an annual salary
of $150,000. Effective February 1, 1997, Mr. Cooney temporarily reduced his
annual salary to $100,000. The amount not being paid is being accrued by the
Company for later payment. The Company may terminate the agreement with or
without cause. If the Company terminates Mr. Cooney's agreement without cause,
the Company must continue to pay Mr. Cooney his salary until September 10, 1998.
Mr. McNutt does not have an employment agreement with the Company. Mr.
McNutt receives a salary of $78,000 annually and was granted options to purchase
75,000 shares of the Company's Common Stock at an exercise price of $2.25 per
share. The options vest 25,000 on August 15, 1997, 25,000 on August 15, 1998,
and 25,000 on August 15, 1999, and expire on August 15, 2002, August 15, 2003,
and August 15, 2004, respectively.
Each executive officer also receives a $725 per month vehicle allowance and
is reimbursed for all other business related expenses.
Termination Arrangements with Former Officers
Frank J. Ball, the former Executive Vice President and General Counsel of
the Company and a Director of the Company had an employment agreement with the
Company that was terminated on December 6, 1996. As a result, the Company must
pay Mr. Ball his salary and benefits through June 1997.
8
<PAGE>
William R. Bauerle, the former President, Chief Operating Officer and
Secretary of the Company and currently a Director of the Company had an
employment agreement with the Company that terminated on June 30, 1997. As a
result, the Company must pay Mr. Bauerle his salary (including all previously
accrued salary) and benefits through December 1997. Mr. Bauerle has agreed to
provide consulting services to the Company at his published rates on an as
needed basis in the future. Mr. Bauerle remains as a Director of the Company and
has been nominated for election at the Meeting.
Michael D. Kessler, the former Vice President of Retail Operations of the
Company, had an employment agreement with the Company that was terminated by
notice by the Company dated December 6, 1996. As a result, the Company paid Mr.
Kessler his salary and benefits through July 4, 1997.
Eric B. Schwartzman, the former Vice President of Marketing and Product
Development, had an employment agreement with the Company that was terminated by
notice by the Company dated January 16, 1997. As a result, the Company must pay
Mr. Schwartzman his salary and benefits through August 15, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1995, Robert J. Cooney, the Company's Chairman of the Board and
Chief Executive Officer, individually guaranteed, until December 31, 2000, the
obligations of the Company under the lease for the Company's facilities. The
lease expires on January 31, 2006 and requires base rental rate payments of
$20,645 per month for the first 36 months with increased rentals thereafter tied
to the Consumer Price Index.
In February 1997, Robert J. Cooney also personally guaranteed an equipment
lease for Laser Storm of Arapahoe Village, Inc., a wholly owned subsidiary of
the Company that owns and operates a Laser Storm(R) game system. The lease is
for a term of 36 months and requires monthly rental payments of approximately
$4,929.
PROPOSAL NUMBER TWO
APPROVAL OF 1996 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
Summary. The Company's Board of Directors has adopted the 1996 Incentive
and Nonstatutory Stock Option Plan (the "1996 Plan"), subject to stockholder
approval at the Meeting. A copy of the 1996 Plan is attached to this Proxy
9
<PAGE>
Statement as Exhibit A. The following is a brief summary of the 1996 Plan, which
is qualified in its entirety by reference to Exhibit A.
Options granted under the 1996 Plan may be either Nonstatutory Options or
Incentive Options. The purpose of the 1996 Plan is to advance the interests of
the Company, its stockholders and its subsidiaries by encouraging and enabling
selected officers, directors, employees, and consultants of the Company, upon
whose judgment, initiative and effort the Company is largely dependent for the
successful conduct of its business, to acquire and retain a proprietary interest
in the Company by ownership of its stock through the exercise of stock options.
Amount of Common Stock Subject to Options Under the 1996 Plan. The 1996
Plan provides for the grant of stock options covering an aggregate of 1,000,000
shares of Common Stock. The number of shares of Common Stock subject to options
is subject to equitable adjustments for any stock dividends, stock splits,
reverse stock splits, combinations, recapitalizations, reclassifications or any
other similar changes which may be required in order to prevent dilution. Any
option which is not exercised prior to expiration or which otherwise terminates
will thereafter be available for further grant under the 1996 Plan.
Administration of the 1996 Plan. The 1996 Plan may be administered by the
Board of Directors or by a committee appointed by the Board of Directors
consisting of not fewer than two non-employee members of the Board of Directors
(the "Committee"). Subject to the conditions set forth in the 1996 Plan, the
Board of Directors or the Committee has full and final authority to determine
the number of shares to be represented by each option, the individuals to whom
and the time or times at which such options shall be granted and be exercisable,
their exercise prices and the terms and provisions of the respective agreements
to be entered into at the time of grant, which may vary. The 1996 Plan is
intended to be flexible, and a significant amount of discretion is vested in the
Board of Directors or the Committee with respect to all aspects of the options
to be granted under the 1996 Plan.
Participants. Nonstatutory Options may be granted under the 1996 Plan to
any person who is or who agrees to become an officer, director, employee or
consultant of the Company or any of its subsidiaries. Incentive Options may be
granted only to persons who are employees of the Company or any of its
subsidiaries. As of June 16, 1997, the Company and its subsidiaries had
approximately 98 employees. The participants will not be required to pay any
sums for the granting of options, but may be required to pay the Company for
extending the options.
On November 1, 1996, the Board of Directors granted Incentive Options to
John E. McNutt and James E. Johnson to purchase a total of 100,000 shares of the
Company's Common Stock. All 100,000 Incentive Options granted have an exercise
price of $2.25 per share and expire at times between October 31, 2002 and
October 31, 2004. Mr. McNutt is an employee of the Company. Mr. Johnson's
10
<PAGE>
employment with the Company terminated on February 15, 1997, thereby terminating
the option and making it available for further grant under the 1996 Plan. The
Incentive Options are not exercisable until the earlier of the date that the
1996 Plan is approved by the shareholders or October 31, 1997. If the 1996 Plan
is not approved by the shareholders, the Incentive Options granted under the
1996 Plan will automatically become Nonstatutory Options.
The following table provides certain information as to the options that
have been granted under the 1996 Plan:
<TABLE>
<CAPTION>
Number of Shares
Optionee Underlying the Options Granted
-------- ------------------------------
<S> <C>
John E. McNutt .......................................... 25,000
All current executive officers (as a group) ............. 25,000
All current directors who are not
executive officers (as a group) ......................... -0-
All employees (other than
executive officers) ..................................... 365,000(1)
</TABLE>
(1) Included is a grant of an option relating to 75,000 shares that was
granted to James E. Johnson and represented 5% or more of the total options
granted under the 1996 Plan. However, Mr. Johnson's option terminated on
February 15, 1997, when his employment with the Company terminated, and the
shares underlying such option are available for further option grants under the
1996 Plan. Further, options relating to an additional 60,000 shares have
terminated when the employment of the persons to whom such options were granted
terminated.
Exercise Price. The exercise price of each Nonstatutory Option granted
under the 1996 Plan is determined by the Board of Directors or the Committee.
The exercise price of each Incentive Option granted under the 1996 Plan is
determined by the Board of Directors or the Committee and shall in no event be
less than 100% (110% in the case of a person who owns directly or indirectly
more than 10% of the Common Stock) of the fair market value of the shares on the
date of grant. The payment of the exercise price of an option may be made in
cash or shares of Common Stock. Fair market value is to be determined by the
Board of Directors or the Committee in accordance with the 1996 Plan and such
determination shall be binding upon the Company and upon the holder. The closing
sale price of the Common Stock on June 16, 1997 as reported on the Nasdaq
Small-Cap Market was $0.50 per share.
11
<PAGE>
Terms of Options. Options may be granted for a term of up to 10 years (five
years in the case of Incentive Options granted to a person who owns directly or
indirectly more than 10% of the Company's outstanding Common Stock), which may
extend beyond the term of the 1996 Plan.
Exercise of Options. The terms governing the exercise of options granted
under the 1996 Plan are to be determined by the Board of Directors or the
Committee, which may limit the number of options exercisable in any period.
Payment of the exercise price upon exercise of an option may be made in any
combination of cash and shares of Common Stock, including the automatic
application of shares of Common Stock received upon exercise of an option to
satisfy the exercise price of additional options (unless the Board of Directors
or the Committee provides otherwise). Where payment is made in Common Stock,
such Common Stock shall be valued for such purpose at the fair market value of
such shares on the date of exercise.
Nontransferability. Incentive Options granted under the 1996 Plan are not
transferable or assignable, other than by will or the laws of descent and
distribution, and, during the lifetime of the holder, options are exercisable
only by the holder. Nonstatutory Options do not contain restrictions on
transferability.
Termination of Relationship. Except as the Board of Directors or the
Committee may expressly determine otherwise, if the holder of an Incentive
Option ceases to be employed by the Company or any of its subsidiaries other
than by reason of the holder's death or permanent disability, all Incentive
Options granted to such holder under the 1996 Plan terminate immediately. In the
event of the death or permanent disability of the holder of an Incentive Option,
the option may be exercised to the extent that the holder might have exercised
the option on the date of death or permanent disability for a period of up to 12
months following the date of death or permanent disability, unless by its terms
the option expires before the end of such 12 month period.
Amendment and Termination of the 1996 Plan. The Board of Directors may at
any time and from time to time amend or terminate the 1996 Plan, but may not,
without the approval of the stockholders of the Company representing a majority
of the voting power present at a stockholders' meeting or represented and
entitled to vote thereon, or by unanimous written consent of the stockholders,
(i) increase the maximum number of shares of Common Stock subject to options
which may be granted under the 1996 Plan, other than in connection with an
equitable adjustment, (ii) change the class of employees eligible for Incentive
Options, or (iii) make any material amendment under the 1996 Plan that must be
approved by the Company's stockholders for the Board of Directors to be able to
grant Incentive Options under the 1996 Plan. No amendment or termination of the
1996 Plan by the Board of Directors may alter or impair any of the rights under
any option granted under the 1996 Plan without the holder's written consent.
12
<PAGE>
Effective Date and Term of the 1996 Plan. Options may be granted under the
1996 Plan during its 10 year term which commenced on November 1, 1996.
Certain Federal Income Tax Consequences.
Incentive Options. The Company believes that with respect to Incentive
Options granted under the 1996 Plan, no income generally will be recognized by
an optionee for federal income tax purposes at the time such an option is
granted or at the time it is exercised. If the optionee makes no disposition of
the shares so received within two years from the date the Incentive Option was
granted and one year from the receipt of the shares pursuant to the exercise of
the Incentive Option, the optionee will generally recognize long term capital
gain or loss upon disposition of the shares.
If the optionee disposes of shares acquired by exercise of an Incentive
Option before the expiration of the applicable holding period, any amount
realized from such a disqualifying disposition will be taxable as ordinary
income in the year of disposition generally to the extent that the lesser of the
fair market value of the shares on the date the option was exercised or the fair
market value at the time of such disposition exceeds the exercise price. Any
amount realized upon such a disposition in excess of the fair market value of
the shares on the date of exercise generally will be treated as long term or
short term capital gain, depending on the holding period of the shares. A
disqualifying disposition will include the use of shares acquired upon exercise
of an Incentive Option in satisfaction of the exercise price of another option
prior to the satisfaction of the applicable holding period.
The Company will not be allowed a deduction for federal income tax purposes
at the time of the grant or exercise of an Incentive Option. At the time of a
disqualifying disposition by an optionee, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount taxable to the
optionee as ordinary income in connection with such disqualifying disposition
(assuming that such amount constitutes reasonable compensation).
Nonstatutory Options. The Company believes that the grant of a Nonstatutory
Option under the 1996 Plan will not be subject to federal income tax. Upon
exercise, the optionee generally will recognize ordinary income and the Company
will be entitled to a corresponding deduction for federal income tax purposes
(assuming that such compensation is reasonable) in an amount equal to the excess
of the fair market value of the shares on the date of exercise over the exercise
price. Gain or loss on the subsequent sale of shares received on exercise of a
Nonstatutory Option generally will be long term or short term capital gain or
loss, depending on the holding period of the shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL OF THE
1996 PLAN.
13
<PAGE>
PROPOSAL NUMBER THREE
ADOPTION OF AN AMENDMENT TO ARTICLE II OF THE
RESTATED ARTICLES OF INCORPORATION WITH AMENDMENTS
TO ADD PARAGRAPH 7
Background and Discussion of Proposed Amendment. The Company was
incorporated under the laws of the State of Colorado on March 12, 1990. Under
the Colorado Corporation Code in effect at that time ("Prior Corporate Code"),
shareholders of a corporation were entitled to preemptive rights to purchase
unissued shares of the corporation unless the corporation's articles of
incorporation expressly denied such rights to its shareholders. Article V,
Section 4 of the Company's Original Articles expressly denied preemptive rights
to its shareholders.
When the Colorado Business Corporation Act ("CBCA") became effective on
July 1, 1994, Section 7-106-301(1) of the CBCA revised the Prior Corporate Code
by providing that shareholders of a corporation do not have preemptive rights to
acquire unissued shares of the corporation unless otherwise provided its
articles of incorporation. In addition, the transition provisions (Section
7-117-101(3) of the CBCA) governing changes between the Prior Corporate Code and
the CBCA provide that shareholders of an existing corporation (one that was in
existence on June 30, 1994) shall have preemptive rights unless the original
articles of incorporation denied such preemptive rights. Thus, shareholders of
the Company continued to have no preemptive rights under the transition
provisions as well.
On November 1, 1994, the directors and shareholders of the Company by
unanimous consent adopted and filed its Restated Articles of Incorporation With
Amendments ("Restated Articles") so that the Company's Articles of Incorporation
would comply with the CBCA. The Company filed Articles of Amendment to its
Restated Articles on September 27, 1995, October 3, 1995 and February 13, 1996,
and filed Articles of Correction on January 29, 1996. The Company's Restated
Articles, as amended and corrected, are silent on the issue of shareholders'
preemptive rights. Based upon Section 7-110-101(1) of the CBCA, which provides
that "whether a provision is required or permitted in the articles of
incorporation is determined as of the effective date of the amendment," the
Company intended the silence in the Restated Articles regarding preemptive
rights to indicate that Section 7-106-301(1) of the CBCA governed preemptive
rights, rather than the transition provisions. In either case, however, the
position of the Board of Directors of the Company is that the Company's
shareholders have no preemptive rights.
To resolve any confusion that may arise due to the silence in the Restated
Articles, as amended and corrected, on the issue of shareholder preemptive
rights, the Board of Directors of the Company recommends that the Restated
Articles, as amended and corrected, be amended by adding paragraph 7 to Article
II of the Restated Articles, as amended and corrected, which provides as
follows:
14
<PAGE>
"7. The shareholders of the corporation do not have a preemptive right
to acquire unissued shares of the corporation."
Effect of Amendment on Stockholders. When the Restated Articles, as amended
and corrected, were adopted subsequent to the CBCA's enactment, the Board of
Directors intended that Section 7-106-301(1) of the CBCA governed preemptive
rights. Therefore, it is the position of the Company's Board of Directors that
the proposed amendment will not change the preemptive rights of the Company's
shareholders but will only serve to clarify the Company's position with respect
to the silence in the Restated Articles, as amended and corrected, regarding
preemptive rights.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ADOPTION OF THE
AMENDMENT TO ARTICLE II OF THE RESTATED ARTICLES OF INCORPORATION WITH
AMENDMENTS TO ADD PARAGRAPH 7.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's principal independent public accountants for the fiscal year
ended December 31, 1996 were HEIN + ASSOCIATES LLP. The Board of Directors has
not met to select the principal independent public accountants for the fiscal
year ended December 31, 1997. Representatives of HEIN + ASSOCIATES LLP are
expected to be present at the Meeting, to have an opportunity to make a
statement if they desire to do so and to be available to respond to appropriate
questions.
ANNUAL REPORT TO STOCKHOLDERS
This proxy statement is accompanied by a copy of the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1996. The Company
will provide without charge to each person to whom a copy of this Proxy
Statement has been delivered, on the written request of such person, by first
class mail or equally prompt means, a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, as filed with the
Securities and Exchange Commission. Requests for such copies should be directed
to Shareholder Relations, at the Company at its principal offices, 7808 Cherry
Creek South Drive, Unit 301, Denver, Colorado 80231
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of the Company's stockholders must be received by the Company within a
reasonable time prior to the mailing of the proxy statement for such Meeting but
no later than March 23, 1998.
15
<PAGE>
SOLICITATION OF PROXIES
The cost of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to stockholders, will be borne by the Company.
Solicitations will be made only by use of the mails, except that, if necessary
to obtain a quorum, officers and regular employees of the Company may make
solicitations of proxies by telephone or electronic facsimile or by personal
calls. Brokerage houses, custodians, nominees and fiduciaries will be requested
to forward the proxy soliciting material to the beneficial owners of the
Company's shares held of record by such persons and the Company will reimburse
them for their charges and expenses in this connection.
OTHER BUSINESS
The Company's Board of Directors does not know of any matters to be
presented at the Meeting other than the matters set forth herein. If any other
business should come before the Meeting, the persons named in the enclosed form
of Proxy will vote such Proxy according to their judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT J. COONEY,
CHAIRMAN OF THE BOARD
Denver, Colorado
July 21, 1997
16
<PAGE>
PROXY
LASER STORM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 15, 1997
The undersigned hereby constitutes and appoints Robert J. Cooney, William
R. Bauerle and John E. McNutt and each of them, the true and lawful attorneys
and proxies of the undersigned with full power of substitution and appointment,
for and in the name, place and stead of the undersigned, to act for and to vote
all of the undersigned's shares of $0.001 par value common stock ("Common
Stock") of Laser Storm, Inc. (the "Company") at the Annual Meeting of
Stockholders (the "Meeting") to be held at Laser Storm of Arapahoe Village, 5150
East Arapahoe Road, Littleton, Colorado 80122, on August 15, 1997, at 9:00 a.m.
Mountain Time, and at all adjournments thereof for the following purposes:
1. Election of Directors;
[ ] FOR THE DIRECTOR [ ] WITHHOLD AUTHORITY TO
NOMINEES LISTED BELOW VOTE FOR ALL NOMINEES
(EXCEPT AS MARKED TO LISTED BELOW
THE CONTRARY BELOW)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
Robert J. Cooney
John E. McNutt
William R. Bauerle
2. Approve the 1996 Incentive and Nonstatutory Stock Option Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
VOTING
3. Adopt an amendment to Article II of the Company's Restated Articles of
Incorporation With Amendments to add paragraph 7 which specifically
provides that the Company's shareholders do not have preemptive rights
to acquire unissued shares of the Company; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
VOTING
<PAGE>
4. In their discretion, the Proxies are authorized to vote upon such
other business as lawfully may come before the Meeting.
The undersigned hereby revokes any proxies as to said shares heretofore
given by the undersigned and ratifies and confirms all that said attorneys and
proxies lawfully may do by virtue hereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THEN THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AT THE MEETING (1) FOR ELECTION OF THE NOMINEES FOR DIRECTOR AS SELECTED BY THE
BOARD OF DIRECTORS; (2) TO APPROVE THE 1996 INCENTIVE AND NONSTATUTORY STOCK
OPTION PLAN; AND (3) TO ADOPT AN AMENDMENT TO ARTICLE II OF THE RESTATED
ARTICLES OF INCORPORATION WITH AMENDMENTS TO ADD PARAGRAPH 7.
It is understood that this proxy confers discretionary authority in respect
to matters not known or determined at the time of the mailing of the Notice of
Annual Meeting of Stockholders to the undersigned. The proxies and attorneys
intend to vote the shares represented by this proxy on such matters, if any, as
determined by the Board of Directors.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement and Annual Report to Shareholders
furnished therewith.
Dated and Signed:
, 1997
-------------------------------------
-------------------------------------------
-------------------------------------------
Signature(s) should agree with the name(s)
stenciled hereon. Executors,
administrators, trustee, guardians and
attorneys should so indicate when signing.
Attorneys should submit powers of attorney.
LASER STORM, INC.
1996 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
1. Purpose of the Plan. The purposes of this 1996 Incentive and
Nonstatutory Stock Option Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to the Employees and Consultants of the Company and to promote the
success of the Company's business. Options granted hereunder may be either
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended, or "nonstatutory stock options," at the discretion of
the Board and as reflected in the terms of the written stock option agreement.
2. Definitions. As used herein, the following definitions shall apply:
a. "Board" shall mean the Committee, if one has been appointed,
or the Board of Directors of the Company if no Committee is appointed.
b. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
c. "Common Stock" shall mean the $0.001 par value common stock of
the Company.
d. "Company" shall mean Laser Storm, Inc., a Colorado
corporation.
e. "Committee" shall mean the Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed, or the Board if no committee is appointed.
f. "Consultant" shall mean any person who is engaged by the
Company or any Subsidiary to render consulting services and is
compensated for such consulting services, but does not include a
director of the Company who is compensated for services as a director
only with the payment of a director's fee by the Company.
g. "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case
of sick leave, military leave, or any other leave of absence approved
by the Board; provided that such leave is for a period of not more
than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
h. "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
<PAGE>
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
i. "Incentive Stock Option" shall mean an Option which is
intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and which shall be clearly identified as such
in the written Stock Option Agreement provided by the Company to each
Optionee granted an Incentive Stock Option under the Plan.
j. "Non-Employee Director" shall mean a director who:
(i) Is not currently an officer (as defined in
Section 16a-1(f) of the Securities Exchange Act of 1934, as
amended) of the Company or a Parent or Subsidiary of the
Company, or otherwise currently employed by the Company or a
Parent or Subsidiary of the Company.
(ii) Does not receive compensation, either directly
or indirectly, from the Company or a Parent or Subsidiary of
the Company, for services rendered as a Consultant or in any
capacity other than as a director, except for an amount that
does not exceed the dollar amount for which disclosure would
be required pursuant to Item 404(a) of Regulation S-K adopted
by the United States Securities and Exchange Commission.
(iii) Does not possess an interest in any other
transaction for which disclosure would be required pursuant to
Item 404(a) of Regulation S-K adopted by the United States
Securities and Exchange Commission.
k. "Nonstatutory Stock Option" shall mean an Option granted under
this Plan which does not qualify as an Incentive Stock Option and
which shall be clearly identified as such in the written Stock Option
Agreement provided by the Company to each Optionee granted a
Nonstatutory Stock Option under this Plan. To the extent that the
aggregate fair market value of Optioned Stock to which Incentive Stock
Options granted under Options to an Employee are exercisable for the
first time during any calendar year (under the Plan and all plans of
the Company or any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options under the Plan.
The aggregate fair market value of the Optioned Stock shall be
determined as of the date of grant of each Option and the
determination of which Incentive Stock Options shall be treated as
qualified incentive stock options under Section 422 of the Code and
which Incentive Stock Options exercisable for the first time in a
particular year in excess of the $100,000 limitation shall be treated
as Nonstatutory Stock Options shall be determined based on the order
in which such Options were granted in accordance with Section 422(d)
of the Code.
2
<PAGE>
l. "Option" shall mean an Incentive Stock Option, a Nonstatutory
Stock Option or both as identified in a written Stock Option Agreement
representing such stock option granted pursuant to the Plan.
m. "Optioned Stock" shall mean the Common Stock subject to an
Option.
n. "Optionee" shall mean an Employee or other person who is
granted an Option.
o. "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
p. "Plan" shall mean this 1996 Incentive and Nonstatutory Stock
Option Plan.
q. "Share" shall mean a share of the Common Stock of the Company,
as adjusted in accordance with Section 11 of the Plan.
r. "Stock Option Agreement" shall mean the agreement to be
entered into between the Company and each Optionee which shall set
forth the terms and conditions of each Option granted to each
Optionee, including the number of Shares underlying such Option and
the exercise price of each Option granted to such Optionee under such
agreement.
s. "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,000,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares which were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
a. Procedure. The Plan shall be administered by the Board or a
Committee appointed by the Board consisting of two or more
Non-Employee Directors to administer the Plan on behalf of the Board,
subject to such terms and conditions as the Board may prescribe.
3
<PAGE>
(i) Once appointed, the Committee shall continue to
serve until otherwise directed by the Board (which for
purposes of this paragraph (a)(i) of this Section 4 shall be
the Board of Directors of the Company). From time to time the
Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
(ii) Members of the Board who are granted, or have
been granted, Options may vote on any matters affecting the
administration of the Plan or the grant of any Options
pursuant to the Plan.
b. Powers of the Board. Subject to the provisions of the Plan,
the Board shall have the authority, in its discretion:
(i) To grant Incentive Stock Options, in accordance
with Section 422 of the Code, and Nonstatutory Stock Options
or both as provided and identified in a separate written Stock
Option Agreement to each Optionee granted such Option or
Options under the Plan; provided however, that in no event
shall an Incentive Stock Option and a Nonstatutory Stock
Option granted to any Optionee under a single Stock Option
Agreement be subject to a "tandem" exercise arrangement such
that the exercise of one such Option affects the Optionee's
right to exercise the other Option granted under such Stock
Option Agreement;
(ii) To determine, upon review of relevant
information and in accordance with Section 8(b) of the Plan,
the fair market value of the Common Stock;
(iii) To determine the exercise price per Share of
Options to be granted, which exercise price shall be
determined in accordance with Section 8(a) of the Plan;
(iv) To determine the Employees or other persons to
whom, and the time or times at which, Options shall be granted
and the number of Shares to be represented by each Option;
(v) To interpret the Plan;
(vi) To prescribe, amend and rescind rules and
regulations relating to the Plan;
4
<PAGE>
(vii) To determine the terms and provisions of each
Option granted (which need not be identical) and, with the
consent of the holder thereof, modify or amend each Option;
(viii) To accelerate or defer (with the consent of
the Optionee) the exercise date of any Option, consistent with
the provisions of Section 7 of the Plan;
(ix) To authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant
of an Option previously granted by the Board; and
(x) To make all other determinations deemed
necessary or advisable for the administration of the Plan.
c. Effect of Board's Decision. All decisions, determinations
and interpretations of the Board shall be final and binding on all
Optionees and any other permissible holders of any Options granted
under the Plan.
5. Eligibility.
a. Persons Eligible. Options may be granted to any person
selected by the Board. Incentive Stock Options may be granted only to
Employees. An Employee, who is also a director of the Company, its
Parent or a Subsidiary, shall be treated as an Employee for purposes
of this Section 5. An Employee or other person who has been granted an
Option may, if he is otherwise eligible, be granted an additional
Option or Options.
b. No Effect on Relationship. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or other
relationship with the Company nor shall it interfere in any way with
his right or the Company's right to terminate his employment or other
relationship at any time.
6. Term of Plan. The Plan became effective on November 1, 1996. It shall
continue in effect until October 31, 2006, unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be 10 years from the date
of grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
5
<PAGE>
Subsidiary, if the Option is an Incentive Stock Option, the term of the Option
shall be five years from the date of grant thereof or such shorter time as may
be provided in the Stock Option Agreement.
8. Exercise Price and Consideration.
a. Exercise Price. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be such price as is
determined by the Board, but the per Share exercise price under an
Incentive Stock Option shall be subject to the following:
(i) If granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing
more than 10% of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share
exercise price shall not be less than 110% of the fair market
value per Share on the date of grant.
(ii) If granted to any other Employee, the per Share
exercise price shall not be less than 100% of the fair market
value per Share on the date of grant.
b. Determination of Fair Market Value. The fair market value per
Share on the date of grant shall be determined as follows:
(i) If the Common Stock is listed on the New York
Stock Exchange, the American Stock Exchange or such other
securities exchange designated by the Board, or admitted to
unlisted trading privileges on any such exchange, or if the
Common Stock is quoted on a National Association of Securities
Dealers, Inc. system that reports closing prices, the fair
market value shall be the closing price of the Common Stock as
reported by such exchange or system on the day the fair market
value is to be determined, or if no such price is reported for
such day, then the determination of such closing price shall
be as of the last immediately preceding day on which the
closing price is so reported;
(ii) If the Common Stock is not so listed or admitted
to unlisted trading privileges or so quoted, the fair market
value shall be the average of the last reported highest bid
and the lowest asked prices quoted on the National Association
of Securities Dealers, Inc. Automated Quotations System or, if
not so quoted, then by the National Quotation Bureau, Inc. on
the day the fair market value is determined; or
6
<PAGE>
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges or so quoted, and bid
and asked prices are not reported, the fair market value shall
be determined in such reasonable manner as may be prescribed
by the Board.
c. Consideration and Method of Payment. The consideration to be
paid for the Shares to be issued upon exercise of an Option, including
the method of payment, shall be determined by the Board and may
consist entirely of cash, check, other shares of Common Stock having a
fair market value on the date of exercise equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such
other consideration and method of payment for the issuance of Shares
to the extent permitted under the Colorado Business Corporation Act.
9. Exercise of Option.
a. Procedure for Exercise: Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria
with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
In the sole discretion of the Board, at the time of the grant
of an Option or subsequent thereto but prior to the exercise of an
Option, an Optionee may be provided with the right to exchange, in a
cashless transaction, all or part of the Option for Common Stock of
the Company on terms and conditions determined by the Board.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment, as authorized
by the Board, may consist of a consideration and method of payment
allowable under Section 8(c) and this Section 9(a) of the Plan. Until
the issuance (as evidenced by the appropriate entry on the books of the
Company or of the duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the
7
<PAGE>
record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
b. Termination of Status as an Employee. In the case of an
Incentive Stock Option, if any Employee ceases to serve as an
Employee, he may, but only within such period of time not exceeding
three months as is determined by the Board at the time of grant of the
Option after the date he ceases to be an Employee of the Company,
exercise his Option to the extent that he was entitled to exercise it
at the date of such termination. To the extent that he was not
entitled to exercise the Option at the date of such termination, or if
he does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.
c. Disability of Optionee. In the case of an Incentive Stock
Option, notwithstanding the provisions of Section 9(b) above, in the
event an Employee is unable to continue his employment with the
Company as a result of his total and permanent disability (as defined
in Section 22(e)(3) of the Code), he may, but only within such period
of time not exceeding 12 months as is determined by the Board at the
time of grant of the Option from the date of termination, exercise his
Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise
the Option at the date of termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
d. Death of Optionee. In the case of an Incentive Stock Option,
in the event of the death of the Optionee:
(i) During the term of the Option if the Optionee was
at the time of his death an Employee the Company and had been
in Continuous Status as an Employee or Consultant since the
date of grant of the Option, the Option may be exercised, at
any time within 12 months following the date of death, by the
Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had
the Optionee continued living and remained in Continuous
Status as an Employee 12 months after the date of death; or
(ii) Within such period of time not exceeding three
months as is determined by the Board at the time of grant of
the Option after the termination of Continuous Status as an
Employee, the Option may be exercised, at any time within 12
months following the date of death, by the Optionee's estate
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or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right
to exercise that had accrued at the date of termination.
10. Nontransferability of Options. In the case of an Incentive Stock
Option, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of any
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of the proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another corporation in a transaction
in which the Company is not the survivor, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of such a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of 30 days from the date of such notice, and the Option will terminate
upon the expiration of such period.
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12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or other
person to whom an Option is so granted within a reasonable time after the date
of such grant. Within a reasonable time after the date of the grant of an
Option, the Company shall enter into and deliver to each Employee or other
person granted such Option a written Stock Option Agreement as provided in
Sections 2(r) and 16 hereof, setting forth the terms and conditions of such
Option and separately identifying the portion of the Option which is an
Incentive Stock Option and/or the portion of such Option which is a Nonstatutory
Stock Option.
13. Amendment and Termination of the Plan.
a. Amendment and Termination. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall
require approval of the shareholders of the Company in the manner
described in Section 17 of the Plan:
(i) An increase in the number of Shares subject to
the Plan above 1,000,000 Shares, other than in connection with
an adjustment under Section 11 of the Plan;
(ii) Any change in the designation of the class of
Employees eligible to be granted Incentive Stock Options; or
(iii) Any material amendment under the Plan that
would have to be approved by the shareholders of the Company
for the Board to continue to be able to grant Incentive Stock
Options under the Plan.
b. Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and
such Options shall remain in full force and effect as if the Plan had
not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing
and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, applicable state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of legal counsel for the Company with
respect to such compliance.
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As a condition to the existence of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares and such other
representations and warranties which in the opinion of legal counsel for the
Company, are necessary or appropriate to establish an exemption from the
registration requirements under applicable federal and state securities laws
with respect to the acquisition of such Shares.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's legal counsel to be necessary for the lawful issuance
and sale of any Share hereunder, shall relieve the Company of any liability
relating to the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. Option Agreement. Each Option granted to an Employee or other persons
shall be evidenced by a written Stock Option Agreement in such form as the Board
shall approve.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company on or before October 31, 1997. Such
shareholder approval and any shareholder approval required under Section 13 of
the Plan, may be obtained at a duly held shareholders meeting by the affirmative
vote of the holders of a majority of the outstanding shares of the voting stock
of the Company, who are present or represented and entitled to vote thereon, or
by unanimous written consent of the shareholders in accordance with the
provisions of the Colorado Business Corporation Act.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
19. Gender. As used herein, the masculine, feminine and neuter genders
shall be deemed to include the others in all cases where they would so apply.
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20. CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CON- STRUCTION, VALIDITY
AND INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
COLORADO.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Plan effective as of November 1, 1996.
LASER STORM, INC.,
a Colorado corporation
By: /s/ William R. Bauerle
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William R. Bauerle, President
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