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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)or Section 240.14a-12
PIXAR
(Exact Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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LOGO
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 25, 1997
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Pixar, a California corporation, will be held on Wednesday, June
25, 1997 at 2:00 p.m., local time, in the Wattis Theater at the San Francisco
Museum of Modern Art located at 151 Third Street, San Francisco, California
94103, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To approve an amendment to Pixar's 1995 Stock Plan to (i) increase the
number of shares reserved for issuance thereunder by 1,000,000 shares
and (ii) to provide for an automatic annual increase in the number of
shares available for issuance thereunder by an amount equal to three
percent (compared to two percent prior to this amendment) of the number
of shares of Pixar's common stock outstanding on the first day of each
calendar year, beginning on January 1, 1998.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of Pixar for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only holders of record of Pixar's common stock at the close of business on
May 13, 1997 are entitled to notice of and to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
shareholder attending the Annual Meeting may vote in person even if he or she
has returned a proxy card.
By Order of the Board of Directors
/s/ Lawrence B. Levy
LAWRENCE B. LEVY
Executive Vice President,
Chief Financial Officer and Secretary
Richmond, California
May 22, 1997
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED.
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PIXAR
----------------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
----------------------
PROCEDURAL MATTERS
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Pixar, a California corporation, for use at Pixar's Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Wednesday, June 25, 1997 at
2:00 p.m, local time, and at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held in the Wattis Theater at the San Francisco Museum of
Modern Art located at 151 Third Street, San Francisco, California 94103. The
telephone number at that location is (415) 357-4000. Pixar's headquarters are
located at 1001 West Cutting Boulevard, Richmond, California 94804, and the
telephone number at that location is (510) 236-4000.
This Proxy Statement and the enclosed proxy card were mailed on or about
May 22, 1997, together with Pixar's 1996 Annual Report to Shareholders, to all
shareholders entitled to vote at the Annual Meeting.
RECORD DATE
Only holders of record of Pixar's common stock, no par value (the "Common
Stock"), at the close of business on May 13, 1997 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
41,169,988 shares of Pixar's Common Stock were outstanding. For information
regarding security ownership by management and by the beneficial owners of more
than 5% of Pixar's Common Stock, see "Security Ownership of Certain Beneficial
Owners and Management."
PROXIES; REVOCABILITY OF PROXIES
All shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting, and not revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated on those proxies.
If no instructions are indicated on a properly executed proxy, the shares
represented by that proxy will be voted as recommended by the Board of
Directors. If any other matters are properly presented for consideration at the
Annual Meeting, the persons named in the enclosed proxy and acting thereunder
will have discretion to vote on those matters in accordance with their best
judgment. The Company does not currently anticipate that any other matters will
be raised at the Annual Meeting.
A shareholder may revoke any proxy given pursuant to this solicitation at
any time before it is voted by delivering to Pixar's Corporate Secretary a
written notice of revocation or a duly executed proxy bearing a date later than
that of the previously submitted proxy, or by attending the Annual Meeting and
voting in person.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Shareholders do not have the right
to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by Pixar. Pixar may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their reasonable expenses in forwarding solicitation
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materials to such beneficial owners. Proxies may also be solicited by certain of
Pixar's directors, officers, and regular employees, without additional
compensation, personally or by telephone, telegram, letter or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence at the Annual Meeting, either in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
shall constitute a quorum for the transaction of business. Pixar intends to
include abstentions and broker non-votes as present or represented for purposes
of establishing a quorum for the transaction of business, but to exclude
abstentions and broker non-votes from the calculation of shares entitled to
vote.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Any proposal of a shareholder of Pixar which is intended to be presented by
such shareholder at Pixar's 1998 Annual Meeting of Shareholders must be received
by Pixar no later than January 22, 1998 in order for such proposal to be
considered for inclusion in Pixar's proxy statement and form of proxy relating
to such meeting.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
A board of four directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for Pixar's four nominees named below, all of whom are presently directors of
Pixar. In the event that any nominee of Pixar is unable or declines to serve as
a director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director. The term of office of each person elected as a director
will continue until the next annual meeting of shareholders or until a successor
has been duly elected and qualified.
The name and certain information regarding each nominee are set forth
below. There are no family relationships among directors or executive officers
of Pixar.
<TABLE>
<CAPTION>
NAME AGE(1) POSITION WITH PIXAR
- ------------------------------------------ ------ ------------------------------------------
<S> <C> <C>
Steve Jobs................................ 42 Chairman, Chief Executive Officer and
Office of the President
Larry W. Sonsini.......................... 56 Director
Skip M. Brittenham........................ 55 Director
Joseph A. Graziano........................ 53 Director
</TABLE>
- ---------------
(1) As of May 13, 1997.
Mr. Jobs is a co-founder of Pixar and has served as its Chairman since
March 1991, as its Chief Executive Officer since February 1986 and in the Office
of the President since February 1995. He has been a director of Pixar since
February 1986 and served as Chairman from February 1986 to November 1988. Mr.
Jobs was also a co-founder of NeXT Software, Inc. ("NeXT"), which developed and
marketed object-oriented software for client/server business applications and
the Internet, and served as the Chairman and Chief Executive Officer of NeXT
from October 1985 until February 1997, when NeXT was acquired by Apple Computer,
Inc. ("Apple"). Mr. Jobs was a co-founder of Apple.
Mr. Sonsini has served as a director of Pixar since April 1995 and served
as Secretary from April 1995 to October 1995. He has been an attorney with the
law firm of Wilson Sonsini Goodrich & Rosati since 1966 and currently serves as
the Chairman of the firm's Executive Committee. Mr. Sonsini also serves as a
director of Lattice Semiconductor Corporation and Novell, Inc. Mr. Sonsini
received A.B. and L.L.B. degrees from the University of California, Berkeley.
Mr. Brittenham has served as a director of Pixar since August 1995. He has
been an attorney with the law firm of Ziffren, Brittenham, Branca & Fischer, an
entertainment law firm, since 1978. Mr. Brittenham currently serves on the board
of, or is a trustee of, numerous charitable organizations, including
Conservation International, the American Oceans Campaign, the Environmental
Media Association and the Alternative Medical AIDS Foundation. Mr. Brittenham
received a B.S. from the United States Air Force Academy and a J.D. from the
University of California at Los Angeles.
Mr. Graziano has served as a director of Pixar since August 1995. From June
1989 to December 1995, he was the Executive Vice President and Chief Financial
Officer of Apple and was a member of the Board of Directors of Apple from June
1993 until October 1995. From May 1987 to June 1989, Mr. Graziano served as
Chief Financial Officer of Sun Microsystems, Inc. and from October 1981 to May
1985 as Chief Financial Officer of Apple. In addition, he has held accounting
positions with various technology companies in the Silicon Valley. Mr. Graziano
also serves as a director of IntelliCorp, Inc. Mr. Graziano received a B.S. in
accounting from Merrimack College and is a certified public accountant.
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BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of three meetings (including regularly
scheduled and special meetings) during fiscal 1996 and also took certain actions
by written consent. No incumbent director during the last fiscal year attended
fewer than 75% of the aggregate of (i) the total number of meetings of the Board
of Directors and (ii) the total number of meetings held by all committees on
which he served.
The Board of Directors of Pixar has two standing committees which were
established in October 1995: an Audit Committee and a Compensation Committee.
Pixar has no nominating committee or a committee performing a similar function.
The Audit Committee, which currently consists of Messrs. Graziano and
Sonsini, is responsible for (i) recommending engagement of Pixar's independent
auditors, (ii) approving the services performed by such auditors, (iii)
consulting with such auditors and reviewing with them the results of their
examination, (iv) reviewing and approving any material accounting policy changes
affecting Pixar's operating results, (v) reviewing Pixar's control procedures
and personnel, and (vi) reviewing and evaluating Pixar's accounting principles
and its system of internal accounting controls. Mr. Brittenham is an alternate
member of the Audit Committee and will serve when another member is unable to
attend a committee meeting. The Audit Committee held four meetings during fiscal
1996.
The Compensation Committee, which currently consists of Messrs. Brittenham
and Graziano, is responsible for (i) reviewing and approving the compensation
and benefits for Pixar's officers and other employees, (ii) administering
Pixar's stock option plans and (iii) making recommendations to the Board of
Directors regarding such matters. The Compensation Committee did not hold any
meetings during fiscal 1996; however, Pixar's Board of Directors performed
similar functions during fiscal 1996.
DIRECTOR COMPENSATION
Directors who are not employees of Pixar receive a fee of $1,000 for each
meeting attended of the Board of Directors and a fee of $1,000 for each meeting
attended of a committee of the Board of Directors if such committee meeting is
not held in conjunction with a meeting of the Board of Directors. All directors
are reimbursed for expenses incurred in attending such meetings.
Non-employee directors are eligible to receive option grants pursuant to
Pixar's 1995 Director Option Plan (the "Director Plan") which was adopted by the
Board of Directors in October 1995, approved by the shareholders in November
1995 and took effect in November 1995. A total of 200,000 shares of Common Stock
has been reserved for issuance under the Director Plan. As of May 13, 1997,
there were no options outstanding under the Director Plan. The Director Plan
provides for an automatic grant of an option to purchase 30,000 shares of Common
Stock (the "First Option") to each nonemployee director who first becomes a
non-employee director (other than an employee director who ceases to be an
employee but remains a director) after the effective date of the Director Plan
on the date on which such person first becomes a non-employee director.
Beginning on the third anniversary of the date he or she became an outside
director, each nonemployee director will automatically be granted an option to
purchase 10,000 shares of Common Stock (a "Subsequent Option") each year on the
date of such anniversary, provided he or she is then a non-employee director.
Each nonemployee director will be eligible to receive a Subsequent Option,
regardless of whether such non-employee director was eligible to receive a First
Option. First Options and each Subsequent Option will have a term of ten years.
One-third of the shares subject to a first Option will vest one year after its
date of grant and an additional one-third will vest at the end of each year
thereafter, provided that the optionee continues to serve as a director on such
dates. All of the shares subject to a Subsequent Option will vest one year after
the date of the option grant, provided that the optionee continues to serve as a
director on such date. The exercise prices of the First Option and each
Subsequent Option will be 100% of the fair market value per shares of Pixar's
Common Stock on the date of the grant of the option. Messrs. Brittenham,
Graziano and Sonsini, all of whom are non-employee directors of Pixar, will be
eligible for Subsequent Options under the Director Plan on the third anniversary
of the date they became directors.
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REQUIRED VOTE
The four nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but have no other legal effect under California law.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
RE-ELECTION OF MESSRS. JOBS, SONSINI, BRITTENHAM AND GRAZIANO.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO PIXAR'S 1995 STOCK PLAN
GENERAL
Pixar's 1995 Stock Plan was adopted by the Board of Directors and approved
by the shareholders in May 1995 and provides for the granting to employees
(including employee directors and officers) of Pixar of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and for the granting of nonstatutory stock options and
stock purchase rights to employees and consultants of Pixar. A total of
13,000,000 shares of Common Stock has been reserved for issuance under the 1995
Stock Plan. Beginning on January 1, 1998, the number of shares of Common Stock
available for issuance under the 1995 Stock Plan will automatically be increased
on the first day of each calendar year by an amount equal to two percent of the
number of shares of Common Stock outstanding on such date. As of May 13, 1997, a
total of 555,538 shares remained available for future grant under the 1995 Stock
Plan.
PROPOSAL
In April 1997, the Board of Directors adopted, subject to shareholder
approval, an amendment to the 1995 Stock Plan to: (i) increase the number of
shares reserved for issuance by an additional 1,000,000 shares of Common Stock,
for an aggregate of 14,000,000 shares reserved for issuance thereunder and (ii)
increase the size of the annual adjustment (beginning on January 1, 1998) from
two percent of the number of shares of Common Stock outstanding on the first day
of each calendar year to three percent of such number. This amendment will
enable Pixar to continue to grant options to eligible employees and consultants
under the terms and conditions of the 1995 Stock Plan.
The Board of Directors believes that the approval of the amendment to the
1995 Stock Plan is in the best interests of Pixar and its shareholders, as the
availability of an adequate number of shares for issuance under the 1995 Stock
Plan and the ability to grant stock options is an important factor in
attracting, motivating and retaining qualified personnel essential to the
success of Pixar.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
entitled to vote at the Annual Meeting is required to approve the amendment to
the 1995 Stock Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1995 STOCK PLAN.
SUMMARY OF 1995 STOCK PLAN
The following summary of the 1995 Stock Plan is qualified in its entirety
by the specific language of the 1995 Stock Plan, a copy of which is available to
any shareholder upon written request to the Corporate Secretary.
Purpose. The purposes of the 1995 Stock Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of Pixar and to promote the
success of Pixar's business.
Administration. The 1995 Stock Plan may be administered by the Board or a
committee of the Board (the "Administrator"), which committee is required to be
constituted to comply with Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and applicable laws. Subject to the other
provisions of the 1995 Stock Plan, the Administrator has the power to determine
the employees and consultants to whom options and stock purchase rights may be
granted, the number of shares subject to the option or stock purchase right and
the exercisability thereof. The Administrator also has the power to reprice
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options if the exercise price of outstanding options exceeds the fair market
value of Pixar's Common Stock. In September 1996, the Administrator offered
employees the opportunity to exchange outstanding stock options that had
exercise prices in excess of $13.00 per share for new options that had exercise
prices of $12.50 per share. See "Report of the Compensation Committee of the
Board of Directors."
Eligibility; Limitations. The 1995 Stock Plan provides that nonstatutory
stock options may be granted to employees and consultants. Incentive stock
options may be granted only to employees. An optionee who has been granted an
option or stock purchase right may, if he or she is otherwise eligible, be
granted additional options or stock purchase rights.
Section 162(m) of the Code limits the deductibility of compensation paid to
certain executive officers of Pixar. To maximize Pixar's deduction attributable
to options granted to such persons, the 1995 Stock Plan provides that no
employee may be granted, in any fiscal year, options and stock purchase rights
to purchase more than 3,000,000 shares of Common Stock.
Terms and Conditions of Options. Each option granted under the 1995 Stock
Plan is evidenced by a written stock option agreement between the optionee and
Pixar and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price
of options to purchase shares of Common Stock at the time the options are
granted. However, the exercise price of an incentive stock option must not
be less than 100% (110% if issued to any person possessing more than 10% of
the voting power of all classes of stock of Pixar (a "10% Shareholder")) of
the fair market value of the Common Stock on the date the option is
granted. For so long as Pixar's Common Stock is traded on the Nasdaq
National Market, the fair market value of a share of Common Stock will be
the closing sales price for such stock (or the closing bid if no sales were
reported) on the last trading day prior to the date of grant as quoted on
such system.
(b) Exercise of the Option. Each stock option agreement will specify
the term of the option and the date when the option is to become
exercisable. The terms of such vesting are to be determined by the
Administrator. Options granted under the 1995 Stock Plan to date generally
become exercisable over four years at a rate of one-fourth of the shares
subject to the options at the end of one year from the date of grant and
1/48th at the end of each month thereafter and have a ten-year term. The
maximum term of an option granted to a 10% Shareholder is five years. An
option is exercised by giving written notice of exercise to Pixar,
specifying the number of full shares of Common Stock to be purchased and by
tendering full payment of the purchase price to Pixar.
(c) Form of Consideration. The consideration to be paid for the
shares of Common Stock issued upon exercise of an option shall be
determined by the Administrator and is set forth in the stock option
agreement. Such form of consideration may vary for each option, and may
consist entirely of cash, check, promissory note, other shares of Pixar's
Common Stock, any combination thereof, or any other legally permissible
form of consideration as may be provided in the stock option agreement.
(d) Termination of Employment. In the event an optionee's continuous
status as an employee or consultant terminates for any reason (other than
upon the optionee's death or disability), the optionee may exercise his or
her option within such period of time as is specified in such optionee's
stock option agreement but only to the extent that the optionee was
entitled to exercise the option at the date of such termination (but in no
event later than the expiration of the term of such option as set forth in
the stock option agreement). Options granted under the 1995 Stock Plan to
date have generally provided that optionees may exercise their options
within thirty days from the date of termination of employment (other than
for death or disability).
(e) Disability. In the event an optionee's continuous status as an
employee or consultant terminates as a result of permanent and total
disability (as defined in Section 22(e)(3) of the Code), the optionee may
exercise his or her option, but only within twelve months from the date of
such termination, and only to the extent that the optionee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of the term of such option as set forth in the stock option
agreement).
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(f) Death. In the event of an optionee's death, the optionee's estate
or a person who acquired the right to exercise the deceased optionee's
option by bequest or inheritance may exercise the option, but only within
twelve months following the date of death, and only to the extent that the
optionee was entitled to exercise it at the date of death (but in no event
later than the expiration of the term of such option as set forth in the
stock option agreement).
(g) Term of Options. The term of each option is the term stated in
the stock option agreement; provided, however, that the term may not exceed
ten years from the date of grant. In the case of an incentive stock option
granted to a 10% Shareholder, the term may not exceed 5 years from the date
of grant. No option may be exercised by any person after the expiration of
its term.
(h) Nontransferability of Options. An option is nontransferable by
the optionee, other than by will or the laws of descent and distribution,
and is exercisable during the optionee's lifetime only by the optionee. In
the event of the optionee's death, options may be exercised by a person who
acquires the right to exercise the option by bequest or inheritance.
(i) Value Limitation. If the aggregate fair market value (as
determined on date of grant) of all shares of Common Stock subject to an
optionee's incentive stock option which are exercisable for the first time
during any calendar year exceeds $100,000, the excess options shall be
treated as nonstatutory options.
(j) Other Provisions. The stock option agreement may contain such
other terms, provisions and conditions not inconsistent with the 1995 Stock
Plan as may be determined by the Administrator.
Stock Purchase Rights. A stock purchase right gives the purchaser a period
of no longer than 30 days from the date of grant to purchase Common Stock. A
stock purchase right is accepted by the execution of a restricted stock purchase
agreement between Pixar and the purchaser, accompanied by the payment of the
purchase price for the shares. Unless the Administrator determines otherwise,
the restricted stock purchase agreement shall give Pixar a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with Pixar for any reason (including death
and disability). The purchase price for any shares repurchased by Pixar shall be
the original price paid by the purchaser. The repurchase option lapses at a rate
determined by the Administrator. A stock purchase right is nontransferable other
than by will or the laws of descent and distribution, and may be exercisable
during the optionee's lifetime only by the optionee.
Adjustment Upon Changes in Capitalization; Corporate Transactions. In the
event of changes in the outstanding Common Stock of Pixar by reason of any stock
splits, reverse stock splits, stock dividends, combinations, reclassifications
or other similar change in the capital structure of Pixar, an appropriate
adjustment shall be made by the Administrator in the following: (i) the number
of shares of Common Stock subject to the 1995 Stock Plan, (ii) the number and
class of shares of stock subject to any option or stock purchase right
outstanding under the 1995 Stock Plan, (iii) and the exercise price of any such
outstanding option or stock purchase right. The determination of the
Administrator as to which adjustments shall be made shall be conclusive. In the
event of a proposed dissolution or liquidation of Pixar, the Board will notify
the holders of options or stock purchase rights at least fifteen days prior to
such action and all outstanding options and stock purchase rights will terminate
immediately prior to the consummation of such proposed action.
Notwithstanding the above, in the event of a merger of Pixar with or into
another corporation or the sale of substantially all of the assets of Pixar, the
1995 Stock Plan requires that each outstanding option and stock purchase right
be assumed or an equivalent option or stock purchase right be substituted by the
successor corporation; provided, however, if such successor or purchaser refuses
to assume or substitute the then outstanding options or stock purchase rights,
the 1995 Stock Plan provides for the full acceleration of the exercisability of
all outstanding options and stock purchase rights for a period of 15 days from
the date of notice of acceleration to the holder and all options or stock
purchase rights will terminate upon the expiration of such period.
Amendment and Termination of the 1995 Stock Plan. The Board may at any
time amend, alter, suspend or terminate the 1995 Stock Plan. Pixar shall obtain
shareholder approval of any amendment to the 1995 Stock Plan in such a manner
and to such a degree as is necessary and desirable to comply with Rule 16b-
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3 under the Exchange Act and Sections 162(m) and 422 of the Code (or any other
applicable law or regulation, including the requirements of any exchange or
quotation system on which the Common Stock is traded). Any amendment or
termination of the 1995 Stock Plan shall not affect options already granted and
such options shall remain in full force and effect as if the 1995 Stock Plan had
not been amended or terminated, unless mutually agreed otherwise between the
optionee and Pixar, which agreement must be in writing and signed by the
optionee and Pixar. In any event, the 1995 Stock Plan shall terminate in May
2005. Any options outstanding under the 1995 Stock Plan at the time of its
termination shall remain outstanding until they expire by their terms.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% Shareholder of Pixar. Pixar is entitled to a deduction in the same amount as
the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of Pixar is subject to tax withholding by Pixar. Pixar is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Upon a disposition of such shares by the optionee, any difference between the
sale price and the optionee's exercise price, to the extent not recognized as
taxable income as provided above, is treated as long-term or short-term capital
gain or loss, depending on the holding period.
Stock Purchase Rights. Stock purchase rights will generally be taxed in
the same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when the stock ceases to be subject
to a substantial risk of forfeiture. The stock will generally cease to be
subject to a substantial risk of forfeiture when it is no longer subject to
Pixar's right to repurchase the stock upon the purchaser's termination of
employment with Pixar. At such times, the purchaser will recognize ordinary
income measured as the difference between the purchase price and the fair market
value of the stock on the date the stock is no longer subject to a substantial
risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by Pixar. Different rules may apply if the purchaser is also an
officer, director, or 10% Shareholder of Pixar.
The foregoing is only a summary of the effect of federal income taxation
upon optionees, holders of stock purchase rights, and Pixar with respect to the
grant and exercise of options and stock purchase rights under the 1995 Stock
Plan. It does not purport to be complete, and does not discuss the tax
consequences of the
9
<PAGE> 12
employee's or consultant's death or the provisions of the income tax laws of any
municipality, state or foreign country in which the employee or consultant may
reside.
PARTICIPATION IN THE 1995 STOCK PLAN
Pixar did not grant any stock options to executive officers during the
fiscal year ended December 31, 1996. Pixar granted stock options to purchase a
total of 1,297,000 shares of Common Stock with a weighted average exercise price
of $15.18 per share to non-executive officer employees during fiscal 1996
pursuant to the 1995 Stock Plan. Such number includes options to purchase a
total of 334,500 shares of Common Stock granted on September 11, 1996 pursuant
to a stock option exchange program offered by the Board of Directors to all
employees. See "Report of the Compensation Committee of the Board of Directors."
Non-employee directors are not currently eligible to participate in the 1995
Stock Plan. Grants under the 1995 Stock Plan are made at the discretion of the
Administrator. Accordingly, future grants under the 1995 Stock Plan are not yet
determinable.
10
<PAGE> 13
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
certified public accountants, to audit the financial statements of Pixar for the
fiscal year ending December 31, 1997. KPMG Peat Marwick LLP has audited Pixar's
financial statements since Pixar's inception. A representative of KPMG Peat
Marwick LLP is expected to be present at the meeting, will have the opportunity
to make a statement, and is expected to be available to respond to appropriate
questions.
REQUIRED VOTE
The Board of Directors has conditioned its appointment of Pixar's
independent auditors upon the receipt of the affirmative vote of a majority of
the shares represented, in person or by proxy, and voting at the Annual Meeting.
In the event that the shareholders do not approve the selection of KPMG Peat
Marwick LLP, the appointment of the independent auditors will be reconsidered by
the Board of Directors.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS PIXAR'S INDEPENDENT AUDITORS.
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
Pixar as of May 13, 1997 for the following: (i) each person who is known by
Pixar to own beneficially more than 5% of the outstanding shares of Pixar's
Common Stock; (ii) each of Pixar's directors; (iii) each of the executive
officers named in the Summary Compensation Table; and (iv) all directors and
executive officers of Pixar as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME OF BENEFICIAL OWNER SHARES(1) OF TOTAL(1)
- ----------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Steve Jobs............................................................. 30,000,001 72.9%
c/o Pixar
1001 West Cutting Boulevard
Richmond, CA 94804
Disney Enterprises, Inc.(2)............................................ 2,500,100 5.9
500 South Buena Vista Street
Burbank, CA 91521
John Lasseter(3)....................................................... 1,063,333 2.5
Edwin E. Catmull(4).................................................... 871,833 2.1
Lawrence B. Levy(5).................................................... 851,666 2.0
William T. Reeves(6)................................................... 741,667 1.8
Larry W. Sonsini(7).................................................... 10,000 *
Skip M. Brittenham(8).................................................. 10,000 *
Joseph A. Graziano(9).................................................. 10,000 *
All directors and executive officers as a group (8 persons)(10)........ 32,816,833 76.1
</TABLE>
- ---------------
* Represents less than 1% of the total.
(1) Based on 41,169,988 shares outstanding on May 13, 1997. The number and
percentage of shares beneficially owned is determined under rules of the
Securities and Exchange Commission ("SEC"), and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within sixty days of
May 13, 1997 through the exercise of any stock option or other right.
Unless otherwise indicated in the footnotes, each person has sole voting
and investment power (or shares such powers with his or her spouse) with
respect to the shares shown as beneficially owned.
(2) Includes 1,500,000 shares issuable upon exercise of warrants.
(3) Includes 723,333 shares subject to options that are exercisable within 60
days of May 13, 1997.
(4) Includes 423,333 shares subject to options that are exercisable within 60
days of May 13, 1997.
(5) Includes 751,666 shares subject to options that are exercisable within 60
days of May 13, 1997.
(6) Includes 141,667 shares subject to options that are exercisable within 60
days of May 13, 1997.
(7) Includes 10,000 shares subject to options that are exercisable within 60
days of May 13, 1997.
(8) Includes 10,000 shares subject to options that are exercisable within 60
days of May 13, 1997.
(9) Includes 10,000 shares subject to options that are exercisable within 60
days of May 13, 1997.
(10) Includes 1,928,332 shares subject to options that are exercisable within 60
days of May 13, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires Pixar's
executive officers, directors and persons who own more than ten percent of
Pixar's Common Stock, to file initial reports of ownership on Form 3 and changes
in ownership on Form 4 or Form 5 with the SEC and the National Association of
Securities Dealers, Inc. Such executive officers, directors and ten-percent
shareholders are also required by SEC rules to furnish Pixar with copies of all
such forms that they file.
12
<PAGE> 15
Based solely on its review of the copies of such forms received by Pixar
and written representations from certain reporting persons that no Forms 5 were
required for such persons, Pixar believes that during fiscal 1996 all Section
16(a) filing requirements applicable to its executive officers, directors and
ten-percent shareholders were complied with.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Pixar's Compensation Committee was formed in October 1995 and is currently
composed of Messrs. Brittenham and Graziano. No interlocking relationship exists
between any member of Pixar's Board of Directors or Compensation Committee and
any member of the board of directors or compensation committee of any other
company, nor has any such interlocking relationship existed in the past. No
member of the Compensation Committee is or was formerly an officer or an
employee of Pixar.
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of
the four most highly compensated executive officers whose salary plus bonus
exceeded $100,000 during the last fiscal year (the "Named Officers"),
information concerning compensation paid for services to Pixar in all capacities
during the last three fiscal years.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- -------------------------------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Steve Jobs........................................ 1996 $ -- $ -- --
Chairman, Chief Executive Officer 1995 -- -- --
and Office of the President 1994 -- -- --
Edwin E. Catmull.................................. 1996 198,512 -- --
Executive Vice President, Chief Technical 1995 182,646 -- 1,600,000
Officer
and Office of the President 1994 170,697 -- --
Lawrence B. Levy(1)............................... 1996 197,789 -- --
Executive Vice President, Chief Financial 1995 158,509 -- 1,600,000
Officer
and Office of the President 1994 -- -- --
John Lasseter..................................... 1996 256,203 -- --
Vice President, Creative Development 1995 200,463 35,000 1,600,000
1994 149,396 -- --
William T. Reeves................................. 1996 211,899 -- --
Technical Director, Feature Films 1995 172,430 -- 840,000
1994 133,374 -- --
</TABLE>
- ---------------
(1) Mr. Levy joined Pixar in February 1995.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options granted to the Named Officers during the fiscal
year ended December 31, 1996.
13
<PAGE> 16
OPTION EXERCISES AND HOLDINGS
The following table sets forth, for each of the Named Officers, certain
information concerning stock options exercised during fiscal 1996, and the
number of shares subject to both exercisable and unexercisable stock options as
of December 31, 1996. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of Pixar's Common Stock as
of December 31, 1996.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steve Jobs................ -- $ -- -- -- $ -- $ --
Edwin E. Catmull.......... 260,000 3,617,063 606,667 483,333 7,765,338 6,186,662
Lawrence B. Levy.......... 105,000 1,771,125 628,334 866,666 8,042,676 11,093,325
John Lasseter............. 180,000 2,422,250 686,667 483,333 8,789,338 6,186,662
William T. Reeves......... 50,000 1,006,875 165,833 24,167 2,122,662 309,338
</TABLE>
- ---------------
(1) Market value of underlying securities based on the closing price of Pixar's
Common Stock on December 31, 1996 (the last trading day of fiscal 1996) on
the Nasdaq National Market of $13.00 minus the exercise price.
EMPLOYMENT AGREEMENTS
Pixar has employment agreements with Edwin E. Catmull and William T. Reeves
that extend until the earlier of (i) the delivery of Pixar's animated feature
film that has the working title A Bug's Life, (ii) the date the feature film
agreement between Pixar and Walt Disney Pictures dated May 3, 1991 terminates or
(iii) July 31, 1998. During the term of their employment agreements, Mr. Catmull
and Mr. Reeves are prohibited from seeking other employment, except during the
last six months of the term of the agreement, and from becoming financially
interested or associated with any entity engaged in a related or competitive
business. The employment agreements can be terminated by Pixar only upon the
respective employee's death or disability or, subject to the consent of Walt
Disney Pictures, for cause. The employment agreements provide for a current
annual salary of $214,000 for Mr. Catmull and $219,350 for Mr. Reeves, with 7%
annual increases for each.
In February 1997, Pixar entered into a new employment agreement with John
Lasseter that extends until February 23, 2004. Pursuant to the agreement, Mr.
Lasseter received a signing bonus of $1,250,000 and was granted additional stock
options to purchase 125,000 shares of Pixar's Common Stock which vest over four
years. The agreement provides for a current annual salary of $700,000 with 8%
annual increases. The agreement also provides for the payment of a bonus (the
"Motion Picture Bonus") based upon domestic theatrical box office gross receipts
from feature-length animated motion pictures ("Feature Films") directed by Mr.
Lasseter. Under the agreement, Mr. Lasseter will direct three Feature Films and
has the option to direct certain sequels to Feature Films he directed if Pixar
elects to produce such sequels within twelve years after the initial release of
the applicable picture. During the term of the agreement, Mr. Lasseter is
prohibited from accepting other employment and from becoming financially
interested or associated with any entity engaged in a related or competitive
business. Pixar can terminate the agreement at any time for any reason. However,
if Pixar terminates Mr. Lasseter's employment without cause, Pixar must pay Mr.
Lasseter (i) an amount equal to 75% of the balance of the salary Mr. Lasseter
would have earned through the remainder of the term of the agreement and (ii)
any portion of the Motion Picture Bonus as and if due. In addition, the vesting
of Mr. Lasseter's stock options would accelerate so that they would be
exercisable in full and Mr. Lasseter could accept employment with any third
party.
14
<PAGE> 17
CERTAIN TRANSACTIONS
In December 1993, Pixar advanced $15,000 to Edwin Catmull, an executive
officer of Pixar, pursuant to a promissory note that bore interest at the annual
rate of 5%. The principal and accrued interest, which totaled $16,976, was
repaid in August 1996.
In May 1995, Pixar loaned $200,000 to Edwin E. Catmull, an executive
officer of Pixar, for the purchase of a new principal residence pursuant to a
promissory note that bore interest of 6.62%, compounded annually. The principal
and accrued interest, which totaled $217,490, was repaid in August 1996.
Pixar has engaged the law firm of Ziffren, Brittenham, Branca & Fischer
("ZBB&F") to handle certain matters. Skip M. Brittenham, a director of Pixar, is
a senior partner of the firm. Pixar has also engaged the law firm of Wilson
Sonsini Goodrich & Rosati ("WSGR") to handle certain legal matters. Larry W.
Sonsini, a director of Pixar, is a member of the firm. Payments by Pixar to each
of ZBB&F and WSGR did not exceed five percent of either law firm's respective
gross revenues in the last fiscal year of either such firm.
Pixar believes that all of the transactions set forth above were made on
terms no less favorable to Pixar than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between Pixar and its
officers, directors and principal shareholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested directors of the Board of Directors, and will be
on terms no less favorable to Pixar than could be obtained from unaffiliated
third parties.
15
<PAGE> 18
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee") was
formed in October 1995 and is responsible for reviewing the compensation and
benefits for Pixar's executive officers, as well as supervising and making
recommendations to the Board on compensation matters generally. The Committee
also administers Pixar's stock option plans and makes grants to executive
officers under the 1995 Stock Plan.
COMPENSATION PHILOSOPHY
The Committee's compensation philosophy is to provide cash and equity
incentives to Pixar's executive officers and other employees to attract
personnel of the highest caliber in order to maintain Pixar's competitive
position. The goals of the Committee are to:
- attract, retain and motivate highly qualified executive officers and
employees who contribute to the long-term success of Pixar
- align the compensation of executive officers with business objectives and
performance
- align incentives for executive officers with the interests of
shareholders in maximizing value
Pixar currently intends to take the necessary steps to conform its
compensation practices to comply with the $1 million compensation deduction cap
under Section 162(m) of the Internal Revenue Code.
ELEMENTS OF COMPENSATION
The compensation for executive officers is based on two elements: Base
Compensation and Long-Term Incentive Compensation.
Base Compensation is determined on the basis of the level of
responsibility, expertise and experience of the executive officer, taking into
account competitive conditions in the industry. Certain of Pixar's executive
officers are compensated pursuant to employment agreements. The compensation of
the other executive officers, except for the Chief Executive Officer who
receives no compensation, is reviewed annually by the Committee and increased on
the basis of performance, Pixar's financial results for the previous year and
competitive conditions.
Long-Term Incentive Compensation is provided through grants of stock
options pursuant to Pixar's 1995 Stock Plan. Ownership of Pixar's Common Stock
is a key element of executive compensation and is intended to provide additional
incentives to the executive officers to maximize shareholder value. The 1995
Stock Plan was adopted in May 1995 and all executive officers received option
grants at that time based mainly on his or her ability to effect Pixar's
performance. Certain executive officers received additional stock options in
1995 pursuant to a provision in their employment agreements which provided that
upon termination of the 1993 Cash Profit Sharing Plan (which terminated
concurrently with the adoption of the 1995 Stock Plan), such individuals would
be granted certain stock options. No stock options were granted to executive
officers during fiscal 1996; however, additional stock options may be granted to
executive officers in the future to reward exceptional performance or to provide
additional unvested equity incentives. All options are granted at the current
market price and generally utilize vesting periods which encourage executive
officers to remain with Pixar.
16
<PAGE> 19
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Pixar's Chief Executive Officer did not receive compensation for his
services in 1996.
STOCK OPTION EXCHANGE
On September 11, 1996, the Board of Directors offered all employees the
opportunity to exchange their outstanding stock options that had exercise prices
in excess of $13.00 per share for new options that would be exercisable at
$12.50 per share, the fair market value of the Company's Common Stock on such
date. These new options were otherwise identical to the old options. The stock
option exchange was an acknowledgment of the importance to the Company of its
employees and of the incentive to employees represented by stock options,
especially in considering alternative opportunities. The Board considered such
factors as the competitive environment for obtaining and retaining qualified
employees and the overall benefit to the shareholders from a highly motivated
group of employees. No executive officers of Pixar participated in the stock
option exchange.
THE BOARD OF DIRECTORS
Steve Jobs
Larry W. Sonsini
Skip M. Brittenham
Joseph A. Graziano
17
<PAGE> 20
PIXAR STOCK PRICE PERFORMANCE GRAPH
The following graph compares Pixar's cumulative total shareholder return
with those of the H&Q Technology Index, the Nasdaq Stock Market Index-U.S. and
the Standard & Poor's Entertainment Index. The graph assumes that $100 was
invested on November 29, 1995 (the date of Pixar's initial public offering) in
(i) Pixar's Common Stock and (ii) the H&Q Technology Index, the Nasdaq Stock
Market Index-U.S. and the Standard & Poor's Entertainment Index, including
reinvestment of dividends. No dividends have been paid or declared on Pixar's
Common Stock. Note that historic stock price performance is not necessarily
indicative of future stock price performance.
<TABLE>
<CAPTION>
S&P
Measurement Period H&Q Technology Nasdaq Stock Entertainment
(Fiscal Year Covered) Pixar Index Market - US Index
<S> <C> <C> <C> <C>
Nov. 29 1995 100 100 100 100
Dec. 1995 131.25 96.34 99.64 97.07
March 1996 57.05 96 100 98.37
June 1996 50 103 108 94.17
Sept. 1996 41.67 109 104 91.29
Dec. 1996 33.33 115 105 98.76
March 1997 45.83 125 95 105.63
</TABLE>
18
<PAGE> 21
OTHER MATTERS
Pixar knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as Pixar
may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute and
return, at your earliest convenience, the accompanying proxy in the envelope
which has been enclosed.
THE BOARD OF DIRECTORS
Richmond, California
May 22, 1997
19
<PAGE> 22
PIXAR 1995 STOCK PLAN
(as amended April 16, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder. Stock Purchase Rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means PIXAR, a California corporation.
(g) "Consultant" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services. The term Consultant shall not include Directors
who are not compensated for their services or are paid only a Director's fee by
the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. A leave of
absence approved by the Company shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company.
For purposes of Incentive Stock Options, no such leave may exceed 90 days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, on the 91st day of such
leave any Incentive
<PAGE> 23
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination and reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option or
a Stock Purchase Right.
-2-
<PAGE> 24
(r) "Optionee" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
(s) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1995 Stock Plan.
(u) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(w) "Stock Purchase Right" means a right to purchase Common Stock
pursuant to Section 11 below.
(x) "Subsidiary" means 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 Section 12, the maximum aggregate
number of Shares which may be subject to option and sold under the Plan is
14,000,000 Shares provided, however, that beginning January 1, 1998, the number
of Shares shall be increased each January 1 by three percent (3%) of the total
issued and outstanding Shares on such date. In no event, except as subject to
Section 12, shall more than 14,000,000 Shares be issued upon the exercise of
Incentive Stock Options under the Plan.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
-3-
<PAGE> 25
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors and Officers, and Employees and Consultants who are neither Directors
nor Officers.
(ii) Administration With Respect to Directors and Officers.
With respect to grants of Options and Stock Purchase Rights to Employees who are
also Officers or Directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. 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, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(iii) Administration With Respect to Other Employees and
Consultants. With respect to grants of Options and Stock Purchase Rights to
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. 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, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
-4-
<PAGE> 26
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 14 of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
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<PAGE> 27
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds the limit imposed by Section 422(d) of the Code or any
successor thereto, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 3,000,000
Shares.
(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iii) If an Option or Stock Purchase Right is cancelled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in
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<PAGE> 28
Section 12), the cancelled Option shall be counted against the limit set forth
in Section 5(d)(i). For this purpose, if the exercise price of an Option is
reduced, such reduction will be treated as a cancellation of the Option and the
grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company, as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
(2) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.
(b) 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 Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of
-7-
<PAGE> 29
the sale or loan proceeds required to pay the exercise price, (6) a reduction in
the amount of any Company liability to the Optionee, including any liability
attributable to the Optionee's participation in any Company-sponsored deferred
compensation program or arrangement, or (7) any combination of the foregoing
methods of payment. In making its determination as to the type of consideration
to accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.
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 Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
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 may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 8(b) hereof.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote, receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 hereof.
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 Employment or Consulting Relationship. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), such
Optionee may, but only within such period of time as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
not exceeding three (3) months after the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
such termination, or if the Optionee does not exercise such Option to the extent
so
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<PAGE> 30
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her "Disability," as such term is defined in Section 22(c)(3) of the Code, the
Optionee may, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the extent
that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) 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 that the Optionee was entitled to exercise the Option on the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death, the
Optionee's estate or a person who acquires the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and
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<PAGE> 31
the time within which such person must accept such offer, which shall in no
event exceed thirty (30) days from the date upon which the Administrator makes
the determination to grant the Stock Purchase Right. The offer shall be accepted
by execution of a Restricted Stock purchase agreement in the form determined by
the Administrator. Shares purchased pursuant to the grant of a Stock Purchase
Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(e) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock 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. The conversion
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<PAGE> 32
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 of Common Stock subject to an Option
or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option or Stock Purchase Right shall
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall have the right to exercise the Option
or Stock Purchase Right as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option or Stock Purchase
Right is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to
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<PAGE> 33
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right 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
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right 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 if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
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<PAGE> 34
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
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<PAGE> 35
PIXAR
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
P
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X The undersigned shareholder of PIXAR, a California
Y corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated May 22,
1997, and hereby appoints Steve Jobs and Lawrence B. Levy, and
each of them, proxies, with full power of substitution, to
represent the undersigned and to vote as designated on the
reverse side, all shares of Common Stock of PIXAR that the
undersigned is entitled to vote at the Annual Meeting of
Shareholders of PIXAR to be held on June 25, 1997 at 2:00 p.m.,
local time, in the Wattis Theater at the San Francisco Museum of
Modern Art located at 151 Third Street, San Francisco,
California 94103, and at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS ON THE
REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING AS THE PROXIES DEEM ADVISABLE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE> 36
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS.
<TABLE>
<S> <C> <C> <C>
1. Election of four Directors:
FOR WITHHELD
NOMINEES: Steve Jobs, Larry W. Sonsini, [ ] [ ] [ ]
Skip M. Brittenham and Joseph A. Graziano ______________________________________
For all nominees except as noted above
2. Proposal to amend Pixar's 1995 Stock Plan as described in the FOR AGAINST ABSTAIN
accompanying Proxy Statement. [ ] [ ] [ ]
3. Proposal to ratify the appointment of KPMG Peat Marwick FOR AGAINST ABSTAIN
LLP as Pixar's independent auditors for the fiscal year ending [ ] [ ] [ ]
December 31, 1997.
</TABLE>
4. In their discretion, the Proxies are authorized to vote upon such other
business which may properly come before the meeting or any adjournments
thereof.
Mark here for address change and note at left [ ]
<TABLE>
<S> <C>
Please sign exactly as your name appears on your stock certificate. If the stock is held by Signature:________________Date_______
joint tenants or as community property, both should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers should give their titles. Signature:________________Date_______
</TABLE>
