<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
DELTAPOINT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
DELTAPOINT, INC.
22 LOWER RAGSDALE DRIVE
MONTEREY, CALIFORNIA 93940
May 10, 1997
TO THE SHAREHOLDERS OF DELTAPOINT, INC.
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
DeltaPoint, Inc. (the "Company"), which will be held at 22 Lower Ragsdale Drive,
Monterey, California, on Friday, June 20, 1997, at 10:00 a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Shareholders.
It is important that your shares be represented and voted at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Returning the proxy does NOT deprive you of your right to attend the
Annual Meeting. If you decide to attend the Annual Meeting and wish to change
your proxy vote, you may do so automatically by voting in person at the meeting.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.
Sincerely,
Jeffrey F. Ait
CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
DELTAPOINT, INC.
22 LOWER RAGSDALE DRIVE
MONTEREY, CALIFORNIA 93940
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
The Annual Meeting of Shareholders ("Annual Meeting") of DeltaPoint, Inc.
(the "Company") will be held at 22 Lower Ragsdale Drive, Monterey, California,
on Friday, June 20, 1997, at 10:00 a.m. for the following purposes:
1. To elect four directors of the Board of Directors to serve until the
next Annual Meeting or until their successors have been duly elected and
qualified;
2. To approve the adoption of an amendment to the Company's 1995 Stock
Option Plan to increase by 400,000 shares the number of shares issuable
under the Plan to 1,220,000 shares;
3. To ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1997; and
4. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the attached
Proxy Statement.
Only shareholders of record at the close of business on April 28, 1997 are
entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. A list of such shareholders will be
available for inspection at the Company's headquarters located at 22 Lower
Ragsdale Drive, Monterey, California, during ordinary business hours for the
ten-day period prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Donald B. Witmer
SECRETARY
Monterey, California
May 10, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
<PAGE>
DELTAPOINT, INC.
22 LOWER RAGSDALE DRIVE
MONTEREY, CALIFORNIA 93940
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of DeltaPoint, Inc., a California corporation
(the "Company"), for the Annual Meeting of Shareholders (the "Annual Meeting")
to be held at 22 Lower Ragsdale Drive, Monterey, California, on Friday, June 20,
1997, at 10:00 a.m., and at any adjournment or postponement of the Annual
Meeting. These proxy materials were first mailed to shareholders on or about May
10, 1997.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Shareholders.
Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On April 28, 1997, the record date for determination of
shareholders entitled to vote at the Annual Meeting, there were 2,567,873 shares
of Common Stock outstanding. Each shareholder of record on April 28, 1997 is
entitled to one vote for each share of Common Stock held by such shareholder on
April 28, 1997. Every shareholder voting for the election of directors (Proposal
One) may cumulate such shareholder's votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the number of
shares that such shareholder is entitled to vote, or distribute such
shareholder's votes on the same principle among as many candidates as the
shareholder may select, provided that votes cannot be cast for more than four
candidates. However, no shareholder shall be entitled to cumulate votes unless
the candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting, prior to
the voting, of the intention to cumulate the shareholder's votes. On all other
matters, each share of Common Stock has one vote. All votes will be tabulated by
the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
QUORUM REQUIRED
The Company's bylaws provide that the holders of a majority of the Company's
Common Stock entitled to vote at the Annual Meeting, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes will be counted for the
purpose of determining the presence of a quorum.
VOTES REQUIRED
PROPOSAL 1. If a quorum is present and voting, the four nominees for
director receiving the highest number of affirmative votes will be elected.
Abstentions and broker non-votes will not be counted in the election of
directors.
PROPOSAL 2. The affirmative vote of a majority of the Votes Cast will be
required under California law to approve the amendment to the 1995 Stock Option
Plan (the "Plan"). For this purpose, the "Votes Cast"
2
<PAGE>
are defined under California law to be the shares of the Company's Common Stock
represented and "voting" at the Annual Meeting. In addition, the affirmative
votes must constitute at least a majority of the required quorum, which quorum
is a majority of the shares outstanding at the record date. Votes that are cast
against the proposal will be counted for purposes of determining both (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal. Abstentions will be counted for purposes of determining
both (i) the presence or absence of a quorum and (ii) the total number of Votes
Cast with respect to the proposal. Accordingly, abstentions will have the same
effect as a vote against the proposal. Broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining the number of
Votes Cast with respect to this proposal.
PROPOSAL 3. Ratification of the appointment of Price Waterhouse LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1997 requires the affirmative vote of a majority of those shares present in
person, or represented by proxy, and cast either affirmatively or negatively at
the Annual Meeting.
PROXIES
Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your proxy
when properly completed. In the event no directions are specified, such proxies
will be voted FOR the Nominees of the Board of Directors (as set forth in
Proposal No. 1), FOR Proposals No. 2 and No. 3 and in the discretion of the
proxy holders as to other matters that may properly come before the Annual
Meeting. You may also revoke or change your proxy at any time before the Annual
Meeting. To do this, send a written notice of revocation or another signed proxy
with a later date to the Secretary of the Company at the Company's principal
executive offices before the beginning of the Annual Meeting. You may also
automatically revoke your proxy by attending the Annual Meeting and voting in
person. All shares represented by a valid proxy received prior to the Annual
Meeting will be voted.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional soliciting material furnished to shareholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees or agents
of the Company. No additional compensation will be paid to these individuals for
any such services. The Company has also retained U.S. Stock Transfer Corporation
to assist in the solicitation of proxies. U.S. Stock Transfer Corporation will
be reimbursed by the Company for its out-of-pocket expenses. Except as described
above, the Company does not presently intend to solicit proxies other than by
mail.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The directors who are being nominated for reelection to the Board of
Directors (the "Nominees"), their ages as of April 15, 1997, their positions and
offices held with the Company and certain biographical information are set forth
below. The proxy holders intend to vote all proxies received by them in the
accompanying form FOR the Nominees listed below unless otherwise instructed. In
the event any Nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be
3
<PAGE>
voted for any nominee who may be designated by the present Board of Directors to
fill the vacancy. As of the date of this Proxy Statement, the Board of Directors
is not aware of any Nominee who is unable or will decline to serve as a
director. The four Nominees receiving the highest number of affirmative votes of
the shares entitled to vote at the Annual Meeting will be elected directors of
the Company to serve until the next Annual Meeting or until their successors
have been duly elected and qualified.
<TABLE>
<CAPTION>
NOMINEES AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
- --------------------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Jeffrey F. Ait..................................... 40 Chief Executive Officer and Director
Donald B. Witmer................................... 43 Chief Operating Officer, Chief Financial Officer,
Secretary and Director
John Hummer (1),(2)................................ 48 Director
Patrick Grady (1),(2).............................. 29 Director
</TABLE>
- ------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
MR. AIT joined the Company in March 1997 as Chief Executive Officer. From
January 1996 until March 1997 he served as Vice President of Internet at The
Santa Cruz Organization, Inc. ("SCO"), a software developer and publisher. From
October 1995 until January 1996 he served as Vice President of acquisitions at
SCO. From October 1993 until October 1995 he served as Vice President of Channel
Sales and Marketing at SCO.
MR. WITMER joined the Company as Vice President of Finance and
Administration and Chief Financial Officer in November 1995, became a director
of the Company in December 1995 and became Chief Operating Officer in February
1996. From 1990 to 1995 he served as controller and then Chief Financial Officer
of Catalyst Semiconductor, Inc. From 1987 to 1990, Mr. Witmer served as an
accountant for Price Waterhouse LLP, independent accountants. Prior to joining
Price Waterhouse LLP, Mr. Witmer was a senior controller at United Technologies
and a legislative analyst for the State of Montana. Mr. Witmer holds a B.A. in
History from Northern Montana College and an M.B.A. from the University of
Montana. Mr. Witmer is a Certified Public Accountant.
MR. HUMMER has been a director of the Company since October 1990. In 1989,
Mr. Hummer founded, and is currently a partner at, Hummer Winblad Venture
Partners. Mr. Hummer serves as a director of several privately held companies
including Books That Work, Centerview Software and Netgravity. From April 1991
to February 1995 he was a director of Powersoft Corporation prior to its
acquisition by Sybase Incorporated and from August 1990 to April 1995 he was a
director of Wind River Systems, Inc. Mr. Hummer received a B.A. in English from
Princeton University and an M.B.A. from the Stanford Graduate School of
Business.
MR. GRADY became a director of the Company in August 1996. Mr. Grady is
currently Managing Director--Venture Capital of H.J. Meyers & Co., Inc. From
June 1993 to March 1996 Mr. Grady served as Senior Vice President of Corporate
Finance at H.J. Meyers & Co., Inc. From March 1991 to May 1993 he was Vice
President of Corporate Finance at Josephthal, Lyon & Ross. Mr. Grady also serves
as a director of Borealis Technology Corp., an enterprise-wide sales force
automation software company, & SoloPoint, Inc., a provider of small office/home
office communication products.
4
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1996, the Board of Directors held
six meetings and acted by written consent on six occasions. For the fiscal year,
each of the directors during the term of their tenure attended or participated
in at least 75% of the aggregate of (i) the total number of meetings or actions
by written consent of the Board of Directors and (ii) the total number of
meetings held by all Committees of the Board of Directors on which each such
director served. The Board of Directors has two standing committees which were
formed on December 1, 1995: the Audit Committee and the Compensation Committee.
During the fiscal year ended December 31, 1996, the Audit Committee of the
Board of Directors held one meeting. The Audit Committee reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the selection of the Company's auditors, the scope
of the annual audits, fees to be paid to the Company's auditors, the performance
of the Company's auditors and the accounting practices of the Company. The
members of the Audit Committee are Messrs. Hummer and Grady.
During the fiscal year ended December 31, 1996, the Compensation Committee
of the Board of Directors held one meeting. The Compensation Committee reviews
the performance of the executive officers of the Company and reviews the
compensation programs for other key employees, including salary and cash bonus
levels and option grants under the 1995 Stock Option Plan, the 1990 Key Employee
Incentive Stock Option Plan and the 1992 Non-Statutory Stock Option Plan. The
members of the Compensation Committee are Messrs. Hummer and Grady.
DIRECTOR COMPENSATION
Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company also
does not pay compensation for committee participation or special assignments of
the Board of Directors.
Non-employee Board members are eligible for option grants pursuant to the
provisions of the Automatic Option Grant Program under the Company's 1995 Stock
Option Plan. In August 1996, Mr. Grady was granted an option to purchase 20,000
shares at an exercise price of $7.50 per share under the Automatic Option Grant
Program. Under the Automatic Option Grant Program, each individual who was a
non-employee Board member on the date of the Company's initial public offering
and each employee who first becomes a non-employee Board member after the date
of such offering will be granted an option to purchase 20,000 shares on the date
such individual joins the Board. In addition, at each Annual Shareholders
Meeting, beginning with the 1997 Annual Meeting, each individual who has served
as a non-employee Board member for at least six months prior to such Annual
Meeting will receive an additional option grant to purchase 1,000 shares of
Common Stock. For further information concerning the terms of these automatic
grants, please see the summary of the Automatic Option Grant Program below under
the heading, "Proposal No. 2--Amendment of the 1995 Stock Option Plan."
Directors who are also employees of the Company are eligible to receive
options and be issued shares of Common Stock directly under the 1995 Stock
Option Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
5
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 15, 1997, certain information
with respect to shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each of the Company's directors and the
executive officers named in the Summary Compensation Table and (iii) all current
directors and executive officers as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Exchange Act. Under this
rule, certain shares may be deemed to be beneficially owned by more than one
person (if, for example, persons share the power to vote or the power to dispose
of the shares). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire shares (for example, upon exercise
of an option or warrant) within sixty (60) days of the date as of which the
information is provided; in computing the percentage ownership of any person,
the amount of shares is deemed to include the amount of shares beneficially
owned by such person (and only such person) by reason of such acquisition
rights. As a result, the percentage of outstanding shares of any person as shown
in the following table does not necessarily reflect the person's actual voting
power at any particular date.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENTAGE OF SHARES
OF BENEFICIAL OWNER OWNED BENEFICIALLY OWNED
- -------------------------------------------------------------------------------- ----------- ---------------------
<S> <C> <C>
Entities affiliated with
Hummer Winblad Venture Partners (1) .......................................... 186,321 7.5%
5900 Hollis St., Suite R
Emeryville, CA 94608
Entities affiliated with
Oak Investment Partners V, L.P. (2) .......................................... 332,601 13.4%
One Gorham Island
Westport, CT 06880
Jeffrey F. Ait (3) ............................................................. 225,000 8.3%
c/o DeltaPoint, Inc.
22 Lower Ragsdale Drive
Monterey, CA93940
William G. Pryor (4) ........................................................... 142,535 5.5%
c/o DeltaPoint, Inc.
22 Lower Ragsdale Drive
Monterey, CA 93940
Donald B. Witmer (5) ........................................................... 203,750 7.6%
c/o DeltaPoint, Inc.
22 Lower Ragsdale Drive
Monterey, CA 93940
John Hummer (1)................................................................. 186,321 7.5%
Patrick Grady (6)............................................................... 146,538 5.6%
All current directors and executive officers
as a group (5 persons) (7).................................................... 906,144 28.7%
</TABLE>
- ------------------------
* Less than 1%.
(1) Consists of 181,877 shares of Common Stock held by Hummer Winblad Venture
Partners and 4,444 shares of Common Stock held by Hummer Winblad Technology
Fund ("Hummer Winblad Technology"). Mr. Hummer, a director of the Company,
is a General Partner of Hummer Winblad Equity
6
<PAGE>
Partners, which is the General Partner of Hummer Winblad Venture Partners
and Hummer Winblad Technology. Mr. Hummer disclaims beneficial ownership of
the securities held by these entities except to the extent of his pecuniary
interest therein arising from his general partnership interest in Hummer
Winblad Equity Partners.
(2) Consists of 325,289 shares of Common Stock, held by Oak Investment Partners
V, L.P. ("Oak Investment") and 7,312 shares of Common Stock held by Oak V
Affiliates Fund, L.P. ("Oak Affiliates"). Oak Affiliates is an affiliate of
Oak Investment.
(3) Consists of an option to purchase 225,000 shares of Common Stock granted on
March 27, 1997 that is immediately exercisable but subject to a right of
repurchase upon termination of employment that lapses 25% after one year and
then in monthly installments over 36 months of service and lapses in full
upon a specified change in control.
(4) Includes 101,894 shares of Common Stock subject to immediately exercisable
options, including an option to purchase 100,000 shares of Common Stock
granted on November 10, 1995 that is immediately exercisable but subject to
a right of repurchase upon termination of employment that lapses in equal
monthly installments over 36 months and lapses in full upon a specified
change in control. See "Management--Stock Option Information."
(5) Consists of 12,500 shares of Common Stock, an immediately exercisable
warrant to purchase 6,250 shares of Common Stock and options to purchase
135,000, 10,000 and 40,000 shares of Common Stock, granted on November 10,
1995, April 22, 1996 and November 4, 1996, respectively, that are
immediately exercisable but subject to a right of repurchase upon
termination of employment that lapses in equal monthly installments over 36
months and lapses in full upon a specified change in control. See
"Management--Employment Contracts."
(6) Includes an option to purchase 20,000 shares of Common Stock granted on
August 13, 1996 that is immediately exercisable but subject to a right of
repurchase upon termination of service as a director that lapses in equal
annual installments over three years and lapses in full upon a specified
change in control. See "Management--1995 Stock Option Plan." Also includes
110,000 shares of Common Stock that may be acquired by H.J. Meyers & Co.,
Inc. ("H.J. Meyers") upon exercise of its Warrant commencing on December 20,
1996 and 16,538 shares of Common Stock that may be acquired by H.J. Meyers
upon exercise of the Placement Agent Warrant issued in connection with the
Debt Financing. Mr. Grady, a director of the Company, is a Managing
Director--Venture Capital of H.J. Meyers. Mr. Grady disclaims beneficial
ownership of the securities that may be acquired by H.J. Meyers except to
the extent of his pecuniary interest therein.
(7) Consists of 239,462 shares of Common Stock, immediately exercisable warrants
to purchase 132,788 shares of Common Stock and 531,894 shares of Common
Stock subject to stock options currently exercisable or exercisable within
sixty (60) days of April 15, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed on
December 1, 1995, and the members of the Compensation Committee are Messrs.
Hummer and Grady. Neither of these individuals was at any time during 1996 or at
any other time, an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
7
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth the compensation earned by the Company's two
former Chief Executive Officers and two other executive officers who earned (or
would have earned) salary and bonus for the 1996 fiscal year in excess of
$100,000 (collectively, the "Named Officers") for services rendered in all
capacities to the Company and its subsidiaries for that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
----------------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ---------------------------------- --------- ----------- ----------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John J. Ambrose (1) .............. 1996 $ 78,461 $ 25,000(2) $ 4,500(3) 145,000 $ 26(4)
Chief Executive Officer and 1995 0 0 0 0 0
Director
Raymond R. Kingman, Jr. (5) ...... 1996 32,000 0 900(6) 0 141,253(7)
Chairman of the Board, President 1995 108,000 0 4,708(6) 100,000 66(4)
and Chief Executive Officer
Donald B. Witmer ................. 1996 120,000 0 30,000(8) 50,000 251(4)
Chief Operating Officer, Chief 1995 19,845(9) 0 5,000(8) 135,000 0
Financial Officer, Secretary and
Director
William G. Pryor ................. 1996 104,950 0 0 0 87(4)
Vice President of Development 1995 92,500 0 0 100,000 87(4)
</TABLE>
- ------------------------------
(1) Mr Ambrose served as the Company's Chief Executive Officer from April 22,
1996 through March 25, 1997.
(2) Represents a signing bonus of $25,000.
(3) Represents a $500 per month car allowance.
(4) Represents life insurance premiums paid by the Company with respect to
insurance policies on the lives of Messrs. Ambrose, Kingman, Witmer and
Pryor.
(5) Mr. Kingman resigned as President and Chief Executive Officer and a director
of the Company, effective April 5, 1996.
(6) Represents a $300 per month car allowance.
(7) Represents a $22 life insurance premium and a severance payment of $141,231.
(8) Represents a $2,000 per month housing allowance and a $500 per month car
allowance.
(9) Mr. Witmer joined the Company in November 1995.
8
<PAGE>
STOCK OPTION INFORMATION
The following table contains information concerning stock option grants made
to the Named Officers during the fiscal year ended December 31, 1996. No stock
appreciation rights were granted to these individuals during such year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH)(2) DATE
- ----------------------------------------------------------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
John J. Ambrose.................................................. 145,000 35.3% $ 9.50 04/21/06
Raymond R. Kingman, Jr........................................... -- 0% -- --
Donald B. Witmer................................................. 10,000 2.4% 9.50 04/21/06
40,000 9.7% 7.50 11/03/06
William G. Pryor................................................. -- 0% -- --
</TABLE>
- ------------------------
(1) Each of the options listed in the table is immediately exercisable. The
shares purchasable thereunder are subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation of
service prior to vesting in such shares. The repurchase right lapses and the
optionee vests in a series of equal monthly installments over thirty-six
months of service commencing on the date of grant of the option. These
options were granted at an exercise price equal to the fair market value of
the Company's Common Stock as determined by the Board of Directors of the
Company on the date of grant. Each option has a maximum term of ten (10)
years, subject to earlier termination in the event of the optionee's
cessation of service with the Company.
(2) In March 1997, the Board of Directors approved a repricing of all options
granted under the Company's stock option plans that were outstanding on such
date and had an exercise price in excess of the fair market value on such
date of $2.25 per share. This option repricing resulted in the cancellation
of all the options granted in the last fiscal year to the Named Officers and
a regrant of options for the same number of shares at an exercise price of
$2.25 per share.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise.
9
<PAGE>
The following table sets forth information concerning option holdings for
the fiscal year ended December 31, 1996 with respect to each of the Named
Officers. No stock appreciation rights were exercised during such year or were
outstanding at the end of that year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END(#)(1) IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(2)
SHARES ACQUIRED VALUE -------------------------------- --------------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------------- ----------- ----------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Ambrose............. 0 0 145,000 0 0 0
Raymond R. Kingman, Jr...... 72,000 379,517 5,894 0 4,028 0
Donald B. Witmer............ 0 0 185,000 0 337,500 0
William G. Pryor............ 0 0 101,894 0 250,000 0
</TABLE>
- ------------------------------
(1) Each of the options listed in the table is immediately exercisable. The
shares purchasable thereunder are subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation of
service prior to vesting in such shares. The repurchase right lapses and the
optionee vests in a series of equal monthly installments over thirty-six
months of service commencing on the date of grant of the option. These
options were granted at an exercise price equal to the fair market value of
the Company's Common Stock as determined by the Board of Directors of the
Company on the date of grant. Each option has a maximum term of ten (10)
years, subject to earlier termination in the event of the optionee's
cessation of service with the Company.
(2) Based on the closing price per share of the Company's Common Stock as listed
on the Nasdaq National Market as of December 31, 1996 of $6.00, less the per
share exercise price.
10
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF 1995 STOCK OPTION PLAN
The shareholders are being asked to vote on a proposal to approve an
amendment to the DeltaPoint, Inc. 1995 Stock Option Plan (the "Option Plan") to
increase the number of shares of Common Stock available for issuance under the
Option Plan by 400,000 shares to a total of 1,220,000 shares of Common Stock.
The Board adopted the amendment on March 21, 1997, subject to shareholder
approval at the Annual Meeting. The following is a description of the Option
Plan. The Company established the Option Plan to provide a means whereby
employees, officers, directors, consultants and independent advisers of the
Company or parent or subsidiary corporations may be given an opportunity to
purchase shares of Common Stock. The Option Plan was adopted by the Board of
Directors (the "Board") on November 8, 1995 and approved by the shareholders in
December 1995. The Board believes that option grants under the Option Plan play
an important role in the Company's efforts to attract, employ, and retain
employees, directors and consultants of outstanding ability. This description is
also being given to satisfy the requirements of Rule 16b-3(b)(2) which provides
an exception from the short-swing profit liability rules of the federal
securities laws for the officers participating in the Option Plan.
The principal terms and provisions of the Option Plan, as amended, are
summarized below. The summary, however, is not intended to be a complete
description of all the terms of the Option Plan. A copy of the Option Plan will
be furnished by the Company to any shareholder upon written request to the Chief
Operating Officer and Chief Financial Officer at the executive offices in
Monterey, California.
STRUCTURE. The Option Plan is divided into two separate components: (i) the
Discretionary Option Grant Program under which employees, certain non-employee
directors and consultants may, at the discretion of the Compensation Committee,
be granted options to purchase shares of Common Stock at an exercise price not
less than 85% of their fair market value on the grant date, and (ii) the
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible non-employee directors to purchase shares
of Common Stock at an exercise price equal to their fair market value on the
grant date.
ADMINISTRATION. The Compensation Committee of the Board, which is comprised
of two (2) or more Board members ("Committee"), administers the Option Plan.
Committee members serve for such period of time as the Board may determine. No
Board member may serve on the Committee if he or she has received an option
grant or stock award under the Option Plan or under any other stock plan of the
Company or its parent or subsidiary corporations within the twelve (12) month
period preceding his or her appointment to the Committee (or, if shorter, the
period commencing on the date of effectiveness of the Company's initial public
offering and ending with the date of appointment to the Committee), other than
grants under the Automatic Option Grant Program. The Option Plan may also be
administered with respect to optionees who are not executive officers subject to
the short-swing profit rules of federal securities laws by the Board or a
secondary committee comprised of one or more Board members.
The Committee (or Board or secondary committee to the extent acting as plan
administrator) has full authority (subject to the express provisions of the
Option Plan) to determine the eligible individuals who are to receive grants
under the Option Plan, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable, the
maximum term for which the option is to remain outstanding, whether the granted
option will be an incentive stock option ("Incentive Option") which satisfies
the requirements of Section 422 of the Internal Revenue Code ("Code") or a
non-statutory option not intended to meet such requirements and the remaining
provisions of the option grant.
ELIGIBILITY. Employees (including officers), consultants and independent
contractors who render services to the Company or its subsidiary corporations
(whether now existing or subsequently established) are eligible to receive
option grants under the Discretionary Option Grant Program. A non-employee
11
<PAGE>
member of the Board or the board of any parent or subsidiary corporation is also
eligible for option grants under the Discretionary Option Grant Program,
provided he or she is not a member of the Committee.
As of April 15, 1997, approximately 47 employees (including 3 officers) were
eligible to participate in the Option Plan.
SECURITIES SUBJECT TO OPTION PLAN. The maximum number of shares of Common
Stock which may be issued over the term of the Option Plan shall not exceed
1,220,000 shares. Such authorized share reserve is comprised of (i) the 820,000
shares authorized by the Board under the Option Plan, and subsequently approved
by the shareholders, plus (ii) an additional increase of 400,000 shares which is
the subject of this Proposal 2.
No one person participating in the Option Plan may receive options and
separately exercisable stock appreciation rights for more than 360,000 shares of
Common Stock over the term of the Option Plan exclusive of options granted prior
to January 1, 1996.
Should an option expire or terminate for any reason prior to exercise in
full, the shares subject to the portion of the option not so exercised will be
available for subsequent option grants under the Option Plan.
DISCRETIONARY OPTION GRANT PROGRAM
PRICE AND EXERCISABILITY. The option exercise price per share in the case
of an Incentive Option may not be less than one hundred percent (100%) of the
fair market value of the Common Stock on the grant date and, in the case of a
non-statutory option, eighty-five percent (85%) of the fair market value of the
Common Stock on the grant date. Options granted under the Discretionary Option
Grant Program become exercisable at such time or times and during such period as
the Committee may determine and set forth in the instrument evidencing the
option grant.
The exercise price may be paid in cash or in shares of Common Stock. Options
may also be exercised through a same-day sale program, pursuant to which a
designated brokerage firm is instructed to effect the immediate sale of the
shares purchased under the option and pay over to the Company, out of the sale
proceeds on the settlement date, sufficient funds to cover the exercise price
for the purchased shares plus all applicable withholding taxes. The Committee
may also assist any optionee (including an officer or director) in the exercise
of his or her outstanding options by authorizing a Company loan to the optionee.
The terms and conditions of any such loan will be established by the Committee
in its sole discretion.
No optionee is to have any shareholder rights with respect to the option
shares until the optionee has exercised the option, paid the exercise price and
become a holder of record of the shares. Options are not assignable or
transferable other than by will or the laws of descent and distribution, and
during the optionee's lifetime, the option may be exercised only by the
optionee.
TERMINATION OF SERVICE. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated
post-service exercise period. Under no circumstances, however, may any option be
exercised after the specified expiration date of the option term. Each such
option will normally, during such limited period, be exercisable only to the
extent of the number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The Committee has complete discretion to
extend the period following the optionee's cessation of service during which his
or her outstanding options may be exercised and/or to accelerate the
exercisability of such options in whole or in part. Such discretion may be
exercised at any time while the options remain outstanding, whether before or
after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more options
may be subject to repurchase by the Company at the original exercise price paid
per share upon the optionee's cessation of service prior to vesting in such
shares. The Committee has complete discretion in establishing the vesting
schedule to be in effect for any such unvested shares and may cancel the
Company's outstanding
12
<PAGE>
repurchase rights with respect to those shares at any time, thereby accelerating
the vesting of the shares subject to the canceled rights.
INCENTIVE OPTIONS. Incentive Options may only be granted to individuals who
are employees of the Company or its parent or subsidiary corporations. During
any calendar year, the aggregate fair market value (determined as of the grant
date(s)) of the Common Stock for which one or more options granted to any
employee under the Option Plan (or any other option plan of the Company or its
parent or subsidiary corporations) may for the first time become exercisable as
Incentive Options shall not exceed one hundred thousand dollars ($100,000).
LIMITED STOCK APPRECIATION RIGHTS. One or more officers of the Company
subject to the short-swing profit restrictions of the federal securities laws
may, at the discretion of the Committee, be granted limited stock appreciation
rights in connection with their option grants under the Option Plan. Any option
with such a limited stock appreciation right in effect for at least six (6)
months may be unconditionally surrendered, to the extent exercisable for one or
more vested option shares, upon the successful completion of a hostile tender
offer for more than 50% of the Company's outstanding voting stock. In return,
the officer will be entitled to a cash distribution from the Company in an
amount per canceled option share equal to the excess of (i) the highest price
per share of Common Stock paid in the tender offer over (ii) the option exercise
price.
TANDEM STOCK APPRECIATION RIGHTS. The Committee is authorized to issue
tandem stock appreciation rights in connection with option grants under the
Discretionary Option Grant Program. Tandem stock appreciation rights provide the
holders with the right to surrender their options for an appreciation
distribution from the Company equal in amount to the excess of (a) the fair
market value of the vested shares of Common Stock subject to the surrendered
option on the surrender date over (b) the aggregate exercise price payable for
such shares. Such appreciation distribution may, at the discretion of the
Committee, be made in cash or in shares of Common Stock.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, non-employee Board members will
receive option grants at specified intervals over their period of Board service.
These special grants may be summarized as follows:
- Each individual who is a non-employee Board member on the date of the
Company's initial public offering and each individual who first becomes a
non-employee Board member after the date of such initial public offering,
whether through election by the shareholders or appointment by the Board,
will automatically be granted, at the time of the offering or at the time
of such initial election or appointment, a nonstatutory stock option to
purchase 20,000 shares of Common Stock. In no event may a non-employee
Board member receive more than one initial 20,000-share option grant.
- On the date of each Annual Shareholders Meeting beginning with the 1997
Annual Meeting, each individual who continues to serve as a director,
whether or not such individual is standing for re-election, will receive
an additional grant of a nonstatutory stock option under the Option Plan
to purchase 1,000 shares of Common Stock, provided such individual has
been a member of the Board for at least six months.
Each option grant under the Automatic Option Grant Program will be subject
to the following terms and conditions:
1. The option price per share will be equal to the fair market value
per share of Common Stock on the automatic grant date and each option is to
have a maximum term of ten years from the grant
13
<PAGE>
date. The initial options granted in connection with the Company's initial
public offering had an exercise price of $4.80 per share.
2. Each automatic option grant will be immediately exercisable for all
of the option shares; the shares purchasable under the option shall be
subject to repurchase at the original exercise price in the event the
optionee's Board service should cease prior to full vesting. With respect to
each grant, the repurchase right shall lapse and the optionee vest in a
series of three (3) equal and successive annual installments over the
optionee's period of continued service as a Board member, with the first
such installment to vest upon the optionee's completion of one (1) year of
Board service, measured from the option grant date.
3. The option will remain exercisable for a 12-month period following
the optionee's termination of service as a Board member for any reason and
may be exercised following the Board member's death by the personal
representatives of the optionee's estate or the person to whom the grant is
transferred by the optionee's will or the laws of inheritance. In no event,
however, may the option be exercised after the expiration date of the option
term. During the applicable exercise period, the option may not be exercised
for more than the number of shares (if any) for which it is exercisable at
the time of the optionee's cessation of Board service.
4. The option shares will become fully vested in the event of a
Corporate Transaction (as defined below) or a Change in Control (as defined
below). The option shares will become fully vested in the event of the
optionee's cessation of Board service by reason of death or permanent
disability.
5. Upon the occurrence of a hostile tender offer, the optionee shall
have a thirty (30) day period in which to surrender to the Company each
automatic option which has been in effect for at least six (6) months and
the optionee will in return be entitled to a cash distribution from the
Company in an amount per canceled option share (whether or not the optionee
is otherwise vested in those shares) equal to the excess of (i) the highest
reported price per share of Common Stock paid in the tender offer over (ii)
the option exercise price payable per share.
6. Option grants under the Automatic Option Grant Program will be made
in strict compliance with the express provisions of that program. The
remaining terms and conditions of the option will in general conform to the
terms described below for option grants under the Discretionary Option Grant
Program and will be incorporated into the option agreement evidencing the
automatic grant.
GENERAL PROVISIONS
ACCELERATION OF OPTIONS/TERMINATION OF REPURCHASE RIGHTS. Upon the
occurrence of either of the following transactions (a "Corporate Transaction"):
(i) the sale, transfer or other disposition of all or substantially all
of the Company's assets in complete liquidation or dissolution of the
Company, or
(ii) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons different from
the persons holding those immediately prior to such transaction,
each outstanding option under the Option Plan will, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable for all of
the shares at the time subject to such option. However, an outstanding option
shall not accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent) or to be replaced with a comparable option to purchase
shares of the capital stock of the successor corporation (or parent), (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or
14
<PAGE>
(iii) the acceleration of such option is subject to other limitations imposed by
the Committee at the time of the option grant. Immediately following the
consummation of the Corporate Transaction, all outstanding options will
terminate and cease to be exercisable, except to the extent assumed by the
successor corporation.
Also upon a Corporate Transaction, the Company's outstanding repurchase
rights applicable to options granted under the Discretionary Option Grant
Program will terminate automatically unless assigned to the successor
corporation.
Any options which are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time shall automatically accelerate (and any
of the Company's outstanding repurchase rights which do not otherwise terminate
at the time of the Corporate Transaction shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary termination within twelve (12) months following the
effective date of such Corporate Transaction. Any options so accelerated shall
remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the involuntary termination.
Upon the occurrence of the following transactions ("Change in Control"):
(i) any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) acquires beneficial ownership of more than
fifty percent (50%) of the Company's outstanding voting stock without the
Board's recommendation, or
(ii) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases by reason of a proxy contest, to be comprised of individuals
who (a) have been Board members continuously since the beginning of such
period or (b) have been elected or nominated for selection as Board members
by a majority of the Board in (a) who were still in office at the time such
election or nomination was approved by the Board,
the Committee has the discretion to accelerate outstanding options and terminate
the Company's outstanding repurchase rights. The Committee also has the
discretion to terminate the Company's outstanding repurchase rights upon the
subsequent termination of the optionee's service within a specified period
following the Change in Control.
The acceleration of options in the event of a Corporate Transaction or
Change in Control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts to
gain control of the Company.
VALUATION. For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value of a share of
Common Stock on any relevant date will be the closing price per share of Common
Stock on that date, as such price is reported on the OTC Bulletin Board. The
closing price of the Common Stock on April 15, 1997 was $2.38 per share.
15
<PAGE>
CHANGES IN CAPITALIZATION. In the event any change is made to the Common
Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares, exchange of shares or other change affecting
the outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one person may be granted
options and separately exercisable stock appreciation rights per calendar year,
(iii) the number and/or class of securities for which automatic option grants
are to be subsequently made per director under the Automatic Option Grant
Program and (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder.
Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.
OPTION PLAN AMENDMENTS. The Board may amend or modify the Option Plan in
any and all respects whatsoever. However, the Board may not, without the
approval of the Company's shareholders, (i) materially increase the maximum
number of shares issuable under the Option Plan (except in connection with
certain changes in capitalization), (ii) materially modify the eligibility
requirements for option grants, or (iii) otherwise materially increase the
benefits accruing to participants under the Option Plan.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on November 7, 2005. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
As of April 15, 1997, options covering 733,837 shares were outstanding under
the Option Plan, 400,830 shares remained available for future option grant,
assuming that Proposal No. 2 is approved by the shareholders, and 85,333 shares
have been issued under the Option Plan. The expiration dates for all such
options range from December 31, 1997 to March 26, 2007.
NEW PLAN BENEFITS AND OPTION GRANT TABLE
Because the Option Plan is discretionary, benefits to be received by
individual optionees are not determinable. The table below shows, as to each of
the executive officers named in the Summary Compensation Table and the various
indicated groups, (i) the number of shares of Common Stock for
16
<PAGE>
which options have been granted under the Option Plan for the one (1)-year
period ending December 31, 1996 plus the period through April 15, 1997 and (ii)
the weighted average exercise price per share.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF PRICE OF
NAME AND POSITION OPTION SHARES GRANTED OPTIONS
- --------------------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Raymond R. Kingman, Jr. (1)...................................................... 0 0
President and Chief Executive Officer
John J. Ambrose (2).............................................................. 145,000 $ 2.25
Chief Executive Officer
William G. Pryor................................................................. 0 0
Vice President of Development
Donald B. Witmer................................................................. 50,000 2.25
Chief Operating Officer and Chief Financial Officer
All current executive officers as a group (4 persons)............................ 420,000 2.25
All current directors (other than executive officers) as a group (2 persons)..... 30,000 7.50
All employees, including current officers who are not executive officers, as a
group (47 persons)............................................................. 410,344 2.25
</TABLE>
- ------------------------
(1) Mr. Kingman terminated from employment with the Company, effective April 5,
1996.
(2) Mr. Ambrose terminated employment with the Company, effective March 25,
1997.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE OPTION PLAN
Options granted under the Option Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Code or non-statutory
options that are not intended to meet such requirements. The federal income tax
treatment for the two types of options differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. However, the spread on an Incentive Stock
Option (the excess of the fair market value of the purchased shares at the time
of exercise over the exercise price paid for those shares) is normally included
in the optionee's alternative minimum taxable income at the time of exercise and
may be subject to the alternative minimum tax. In addition, the optionee will
recognize taxable income in the year in which the purchased shares are sold or
otherwise made the subject of disposition.
For federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying disposition
of the shares, then the excess of (i) the fair market value of those shares on
the date the option was exercised over
17
<PAGE>
(ii) the exercise price paid for the shares will be taxable as ordinary income.
Any additional gain recognized upon the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year in which such disposition occurs equal to the excess of (i) the fair market
value of such shares on the date the option was exercised over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
The Company anticipates that any compensation deemed paid by the Company upon
one or more disqualifying dispositions of incentive stock option shares by the
Company's executive officers will remain deductible by the Company and will not
have to be taken into account for purposes of the $1 million deduction
limitation which covers certain executive officers of the Company.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares on the exercise date over the
exercise price paid for the shares, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-statutory option if the purchased shares are subject to
repurchase by the Company. These special provisions may be summarized as
follows:
(i) If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original exercise price in the
event of the optionee's termination of service prior to vesting in such
shares, the optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the excess of (a) the
fair market value of the shares on the date such repurchase right lapses
with respect to such shares over (b) the exercise price paid for the shares.
(ii) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise
of the non-statutory option an amount equal to the excess of (a) the fair
market value of the purchased shares on the exercise date (determined as if
the shares were not subject to the Company's repurchase right) over (b) the
exercise price paid for such shares. If the Section 83(b) election is made,
the optionee will not recognize any additional income as and when the
repurchase right lapses.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee. The Company anticipates that the compensation deemed paid by the
Company upon the exercise of non-statutory options with exercise prices equal to
the fair market value of the option shares on the grant date will remain
deductible by the Company and will not have to be taken into account for
purposes of the $1 million deduction limitation which covers certain executive
officers of the Company.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to a business
expense deduction equal to the appreciation distribution for the taxable year of
the Company in which the ordinary income is recognized by the optionee.
ACCOUNTING TREATMENT
Under the accounting principles currently in effect for employee stock plans
such as the Option Plan, option grants with exercise prices equal to the fair
market value of the underlying shares on the grant date will not result in any
compensation expense to the Company for financial reporting purposes. To the
extent
18
<PAGE>
the exercise price is less than such fair market value, a compensation expense
will arise as of the date of grant which will have to be recognized over the
vesting period in effect for the option grant. In addition, outstanding options
will in all events be taken into account in the calculation of earnings per
share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights that have
no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to be
charged periodically against the Company's earnings. Accordingly, at the end of
each fiscal quarter, the amount (if any) by which the fair market value of the
shares of Common Stock subject to such outstanding stock appreciation rights has
increased from prior quarter-end will be accrued as compensation expense to the
extent such fair market value is in excess of the aggregate exercise price in
effect for such rights.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (Statement No. 123), issued in October 1995 and
effective for fiscal years beginning after December 15, 1995, permits, but does
not require, a fair value based method of accounting for employee stock options
or similar equity instruments. Statement No. 123 allows an entity to elect to
continue to measure compensation cost under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APBO No. 25), but requires
pro forma disclosures of net earnings and earnings per share as if the fair
value based method of accounting had been applied. The Company adopted Statement
No. 123 in 1996. While the Company is still evaluating Statement No. 123, it
currently expects to elect to continue to measure compensation cost under APBO
No. 25, and comply with the pro forma disclosure requirements. If the Company
makes this election, Statement No. 123 will have no impact on the Company's
consolidated financial position or results of operations.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S 1995 STOCK OPTION PLAN.
Should such shareholder approval not be obtained, then the amendment to the
Option Plan will not become effective, and all outstanding options granted on
the basis of the 400,000 share increase will terminate without ever becoming
exercisable for any of the option shares.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
On November 10, 1995, the Company entered into employment agreements with
Raymond R. Kingman, Jr., who served as President and Chief Executive Officer of
the Company until his resignation as an officer and director on April 5, 1996,
and William G. Pryor, Vice President of Development. The agreements provide for
a grant to each individual of an option to purchase 100,000 shares of Common
Stock at an exercise price of $3.50 per share. The option is immediately
exercisable but subject to a right of repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service prior to
vesting in such shares. The repurchase right lapses and the optionee vests in a
series of equal monthly installments over 36 months, beginning on the one-month
anniversary of the grant date, and lapses in full upon a specified Change in
Control of the Company. A Change in Control includes liquidation or dissolution
of the Company or a merger or consolidation in which at least fifty percent
(50%) of the Company's shares are transferred to an entity different than the
entity holding such shares prior to such change in control. Each option has a
maximum term of ten (10) years, subject to earlier termination in the event of
the optionee's cessation of service with the Company. The agreement also
provides that each of Messrs. Kingman and Pryor will receive a severance payment
in the amount of six to twelve months of his base salary and other benefits if
his employment is terminated in certain circumstances, such as an involuntary
termination other than for cause (six months base salary) or an involuntary
termination within twenty-four months of a Change in Control (twelve months base
salary).
19
<PAGE>
In November 1995, the Company entered into an employment agreement with
Donald B. Witmer, pursuant to which Mr. Witmer became Vice President of Finance
and Administration and Chief Financial Officer of the Company. The agreement
provides for an annual salary of $120,000, a $2,000 per month housing allowance
and a $500 per month car allowance. The agreement also provides for a grant of
an option to purchase 135,000 shares of Common Stock at an exercise price of
$3.50 per share. The option is immediately exercisable but subject to a right of
repurchase by the Company at the original exercise price paid per share upon the
optionee's cessation of service prior to vesting in such shares. The repurchase
right lapses and the optionee vests in a series of equal monthly installments
over 36 months, beginning on the date Mr. Witmer commences employment, and
lapses in full upon a specified Change in Control of the Company, as defined
above. The option has a maximum term of ten (10) years, subject to earlier
termination in the event of the optionee's cessation of service with the
Company. The agreement also provides that Mr. Witmer will receive a severance
payment in the amount of six to twelve months of his base salary and other
benefits if his employment is terminated in certain circumstances, such as an
involuntary termination other than for cause (six months base salary plus bonus
and other benefits) or an involuntary termination within twenty-four months of a
Change in Control (twelve months base salary plus bonus and other benefits).
In March 1996 John J. Ambrose executed an offer letter with the Company,
pursuant to which Mr. Ambrose became Chief Executive Officer in April 1996. The
offer letter provides for an annual salary of $120,000, a signing bonus of
$25,000 and a grant of an option to purchase 145,000 shares of Common Stock.
Subsequently, Mr. Ambrose terminated from employment with the Company, effective
as of March 25, 1997.
On April 5, 1996, the Company entered into a Separation Agreement and
Release with Mr. Kingman in connection with his resignation which, among other
things, provided for certain payments and other financial compensation. Pursuant
to the Separation Agreement, the Company agreed to pay Mr. Kingman a severance
payment of $108,000 and to accelerate vesting of 62,500 of his 100,000-share
option grant. The Company also agreed to provide continued health care coverage
for a period of up to 12 months.
On March 24, 1997, Jeffrey F. Ait executed an offer letter with the Company
pursuant to which Mr. Ait became Chief Executive Officer of the Company. The
offer letter provides for an annual salary of $165,000 and for the grant of an
option to purchase 225,000 shares of common stock at an exercise price equal to
the fair market value per share on the date the option is granted. The option
will become exercisable for 25% of the shares after one year of service and for
the remainder in equal monthly installments over the next 36 months of service.
If Mr. Ait's employment with the Company is terminated for reasons other than
cause within six months following a specified change in control of the Company,
the letter provides that Mr. Ait's base salary shall continue to be paid for one
year following his last day of employment. All stock options vest in full and
become exercisable as to all of the shares immediately prior to a specified
change in control of the Company. A change in control includes the acquisition
by any person of at least 50% of the total outstanding voting securities of the
Company, or a merger or consolidation of the Company other than a merger which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent at least 50% of the total outstanding
voting securities of the Company or the surviving entity, or a liquidation of
the Company or the sale of all of the Company's assets.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRIVATE PLACEMENT TRANSACTIONS
The Company has issued and sold the following securities to persons who are
principal shareholders or directors of the Company. Each share of Series A,
Series B, Series C and Series D Preferred Stock was
20
<PAGE>
affected by a one-for-5.3 reverse stock split before giving effect to the
conversion of such outstanding Preferred Stock upon the closing of the Company's
initial public offering in December 1995:
<TABLE>
<CAPTION>
SHARES OF
SHARES OF SHARES OF SHARES OF SHARES OF WARRANTS TO COMMON STOCK
SERIES A SERIES B SERIES C SERIES D PURCHASE ISSUED UPON
PREFERRED PREFERRED PREFERRED PREFERRED COMMON PROMISSORY NOTE
INVESTOR(1) STOCK(2) STOCK(3) STOCK(4) STOCK(5) STOCK(6) CONVERSION(7)
- ----------------------------------------- ----------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Entities Affiliated with Hummer Winblad
Venture Partners(8).................... 55,341 22,641 43,620 26,801 27,629 31,667
Entities Affiliated with Oak, Investment
Partners V Fund, L.P................... -- 60,377 34,269 48,242 45,209 31,667
</TABLE>
- ------------------------
(1) Shares held by all affiliated persons and entities have been aggregated.
(2) The shares were issued in October 1990. The per share purchase price for the
Series A Preferred Stock was $18.10 per share.
(3) The shares were issued in June 1992. The per share purchase price for the
Series B Preferred Stock was $33.13.
(4) The shares were issued in April 1995. The per share purchase price for the
Series C Preferred Stock was $5.78.
(5) The shares were issued in May 1995. The per share purchase price for the
Series D Preferred Stock was $9.33. The consideration paid for such stock
was a combination of cash and cancellation of indebtedness.
(6) The warrants were issued in March 1992, March 1993 and May 1995.
(7) Represents shares of Common Stock issued upon the conversion of the
Convertible Notes at a conversion price of $3.25 per share. Of the $300,000
principal amount of the Convertible Notes, $150,000 was issued to each of
entities affiliated with Hummer Winblad Venture Partners ("Hummer Winblad
Ventures") and entities affiliated with Oak Investment Partners V, L.P.
("Oak Investment"). In November 1995, each of Hummer Winblad Ventures and
Oak Affiliates agreed to convert the principal amount of said Convertible
Note, plus accrued interest, into 63,334 shares of Common Stock. In
consideration for such agreement, in November 1995 the Company issued each
of Hummer Winblad Ventures and Oak Investment warrants to purchase 31,667
shares of Common Stock exercisable at a price of $7.20 per share for a
period of 30 months following December 26, 1995 together at a price of $8.40
per share thereafter through November 6, 2000. In addition, in November
1995, each of Hummer Winblad Ventures and Oak Investment agreed to exchange
outstanding warrants to purchase Common Stock for the same number of
warrants with the terms described in the preceding sentence.
(8) Mr. Hummer, an affiliate of Hummer Winblad Technology Partners, is a
director of the Company.
In November 1995, the Company issued 125,000 units, each unit consisting of
two shares of Series E Preferred Stock and a warrant to purchase one share of
Common Stock, for $8.00 per unit. Each share of Series E Preferred Stock
converted into one share of Common Stock upon the closing of the Company's
initial public offering in December 1995. Hummer Winblad Ventures purchased
3,125 units. Oak Investment purchased 6,113 units and Oak Affiliates purchased
137 units.
In November 1996, the Company issued 30,970 shares of Common Stock to Oak
Investment, 697 shares of Common Stock to Oak Affiliates, 30,084 shares of
Common Stock to Hummer Winblad Ventures and 1,583 shares of Common Stock to
Hummer Winblad Technology, all pursuant to the conversion of the notes described
in the chart and footnote 7 above.
21
<PAGE>
In December 1996, the Company issued an aggregate of 145,547 shares of
Common Stock to Oak Investment and Oak Affiliates at a price of $5.00 per share
pursuant to the exercise of warrants, including the warrants described in the
chart and footnote 7 above, of which warrants to purchase 62,421 shares were
acquired from Hummer Winblad Venture and Hummer Winblad Technology.
In December 1996, the Company issued $2,000,000 in principal amount of
Convertible Notes to High Risk Opportunities Hub Fund Ltd. pursuant to the Debt
Financing. Based on an assumed conversion price of $6.50 per share, such
Convertible Notes are convertible at the option of the holder into 102,564
shares of Common Stock on or after March 1, 1997, an additional 102,564 shares
on or after March 31, 1997 and an additional 102,564 shares on or after April
30, 1997; provided, however, that the holder may not convert Convertible Notes,
without the Company's prior written consent, if such conversion would cause such
holder's aggregate ownership of the Company's capital stock to exceed 4.9% of
the Company's then issued and outstanding capital stock.
The Company believes that the foregoing transactions were in its best
interests. All future transactions by the Company with officers, directors, 5%
shareholders and their affiliates will be entered into only if the Company
believes that such transactions are reasonably expected to benefit the Company
and the terms of such transactions are no less favorable to the Company than
could be obtained from unaffiliated parties.
22
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the shareholders to ratify the appointment of Price
Waterhouse LLP as the Company's independent public accountants for the fiscal
year ending December 31, 1997. The affirmative vote of the holders of a majority
of shares present or represented by proxy and voting at the Annual Meeting will
be required to ratify the appointment of Price Waterhouse LLP.
In the event the shareholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the appointment is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the Company's and its
shareholders' best interests.
Price Waterhouse LLP has audited the Company's financial statements for its
last eight fiscal years. Its representatives are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE LLP TO SERVE AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The members of the Board of Directors, the executive officers of the Company
and persons who hold more than 10% of the Company's outstanding Common Stock are
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, which require them to file reports with
respect to their ownership of the Company's Common Stock and their transactions
in such Common Stock. Based upon the copies of Section 16(a) reports that the
Company received from such persons for their 1996 fiscal year transactions in
the Common Stock and their Common Stock holdings and the written representations
received from one or more of such persons, the Company believes that all
reporting requirements under Section 16(a) for such fiscal year were met in a
timely manner by its executive officers.
FORM 10-KSB
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-KSB REPORT FOR FISCAL YEAR 1996, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULE AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO
DELTAPOINT, INC., 22 LOWER RAGSDALE DRIVE, MONTEREY, CALIFORNIA 93940, ATTN:
SHARON L. FUGITT, CONTROLLER.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals that are intended to be presented at the 1998 Annual
Meeting that are eligible for inclusion in the Company's proxy statement and
related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company not later
than January 10, 1998 in order to be included. Such shareholder proposals should
be addressed to DeltaPoint, Inc., 22 Lower Ragsdale Drive, Monterey, California
93940, Attn: Donald B. Witmer, Chief Financial Officer.
23
<PAGE>
OTHER MATTERS
The Board knows of no other matters to be presented for shareholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Monterey, California
May 10, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
24
<PAGE>
DELTAPOINT, INC.
1995 STOCK OPTION PLAN
(As amended and restated March 21, 1997)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the interests of
DeltaPoint, Inc., a California corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity programs:
(i) the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock, and
(ii) the Automatic Option Grant Program under which Eligible
Directors shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Four shall apply to all
equity programs under the Plan and shall accordingly govern the interests of
all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant Program with respect to Section 16
Insiders. No non-employee Board member shall be eligible to serve on the
Primary Committee if such individual has, during the twelve (12)-month period
immediately preceding the date of his or her appointment to the Committee or
(if shorter) the period commencing with the Section 12(g) Registration Date
and ending with the date of his or her appointment to the Primary Committee,
received an option grant or direct stock issuance under the Plan or any other
stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary), other than pursuant to the
Automatic Option Grant Program.
<PAGE>
B. Administration of the Discretionary Option Grant Program with
respect to all other persons eligible to participate in those programs may,
at the Board's discretion, be vested in the Primary Committee or a Secondary
Committee, or the Board may retain the power to administer those programs
with respect to all such persons. The members of the Secondary Committee may
be Board members who are Employees eligible to receive discretionary option
grants or direct stock issuances under the Plan or any stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any
Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers
and authority previously delegated to such committee.
D. The Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program and to make such
determinations under, and issue such interpretations of, the provisions of
such program and any outstanding options thereunder as it may deem necessary
or advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant Program under
its jurisdiction or any option thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No
member of the Primary Committee or the Secondary Committee shall be liable
for any act or omission made in good faith with respect to the Plan or any
option grants made under the Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to
option grants made thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant Program are as follows:
(i) Employees,
(ii) non-employee members of the Board (other than those
serving as members of the Primary Committee) or the board of directors
of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to
the provisions of the Plan) to determine, with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the status of
the granted option as either an
2.
<PAGE>
Incentive Option or a Non-Statutory Option, the time or times at which each
option is to become exercisable and the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding.
C. The individuals eligible to receive option grants under the
Automatic Option Grant Program shall be (i) those individuals who are serving
as non-employee Board members on the Automatic Option Grant Program Effective
Date or who are first elected or appointed as non-employee Board members
after such date, whether through appointment by the Board or election by the
Corporation's shareholders, and (ii) those individuals who continue to serve
as non-employee Board members after one or more Annual Shareholders Meetings
held after the Automatic Option Grant Program Effective Date. A non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive an option grant under
the Automatic Option Grant Program on the Automatic Option Grant Program
Effective Date or at the time he or she first becomes a non-employee Board
member, but such individual shall be eligible to receive periodic option
grants under the Automatic Option Grant Program upon his or her continued
service as a non-employee Board member following one or more Annual
Shareholders Meetings.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 1,220,000
shares.(1)
B. No one person participating in the Plan may receive options and
separately exercisable stock appreciation rights for more than 360,000 shares
of Common Stock over the term of the Plan, exclusive of options and
separately exercisable stock appreciation rights granted prior to January 1,
1996.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii)
the options are cancelled in accordance with the cancellation-regrant
provisions of Article Two. All shares issued under the Plan, whether or not
those shares are subsequently repurchased by the Corporation pursuant to its
repurchase rights under the Plan, shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent issuance under the
Plan. In addition, should the exercise price of an option under the Plan be
paid with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option under
the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock
issued to the holder of such option.
D. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change
- -----------------
(1) Reflects the additional 200,000-share increase authorized by the Board
on February 15, 1996 and approved by the shareholders at the 1996 Annual
Shareholders Meeting and the additional 400,000-share increase authorized by
the Board on March 21, 1997, subject to shareholder approval at the 1997
Annual Shareholders Meeting.
3.
<PAGE>
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
number and/or class of securities for which any one person may be granted
options and separately exercisable stock appreciation rights over the term of
the Plan, (iii) the number and/or class of securities for which automatic
option grants are to be subsequently made per Eligible Director under the
Automatic Option Grant Program and (iv) the number and/or class of securities
and the exercise price per share in effect under each outstanding option in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
4.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in one or
more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date,
or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
5.
<PAGE>
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as
shall be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the date
of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of Service.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(v) In the event of a Corporate Transaction, the
provisions of Section III of this Article Two shall govern the period
for which the outstanding options are to remain exercisable following
the Optionee's cessation of Service and shall supersede any provisions
to the contrary in this section.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from
the period otherwise in effect for that option to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of
6.
<PAGE>
vested shares of Common Stock for which such option is exercisable at
the time of the Optionee's cessation of Service but also with respect to
one or more additional installments in which the Optionee would have
vested under the option had the Optionee continued in Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned in accordance with the terms of a Qualified Domestic
Relations Order. The assigned option may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to such
Qualified Domestic Relations Order. The terms applicable to the assigned
option (or portion thereof) shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem
appropriate
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section
II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the exercise price per share shall not be
less than one hundred
7.
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ten percent (110%) of the Fair Market Value per share of Common Stock on the
option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall
NOT so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above
shall be made by the Plan Administrator, and its determination shall be
final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
C. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed or replaced (or those
repurchase rights are to be assigned) in the Corporate Transaction.
D. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number
and class of securities available for issuance under the Plan on both an
aggregate and per Optionee basis following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
F. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which
do not otherwise terminate at the time of the
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Corporate Transaction shall automatically terminate and the shares of Common
Stock subject to those terminated rights shall immediately vest in full) in
the event the Optionee's Service should subsequently terminate by reason of
an Involuntary Termination within twelve (12) months following the effective
date of such Corporate Transaction. Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration
of the option term or (ii) the expiration of the one (1)-year period measured
from the effective date of the Involuntary Termination.
G. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to (i) provide for the automatic acceleration of one or
more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Change in
Control or (ii) condition any such option acceleration (and the termination
of any outstanding repurchase rights) upon the subsequent Involuntary
Termination of the Optionee's Service within a specified period following the
effective date of such Change in Control. Any options accelerated in
connection with a Change in Control shall remain fully exercisable until the
expiration or sooner termination of the option term.
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred Thousand
Dollar limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
I. The grant of options under the Discretionary Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plan) and to grant in substitution new options covering the same
or different number of shares of Common Stock but with an exercise price per
share based on the Fair Market Value per share of Common Stock on the new
option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (A) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the
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surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be
made in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (A) five (5) business days after the
receipt of the rejection notice or (B) the last day on which the option
is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for
vested shares of Common Stock. In return for the surrendered option,
the Optionee shall receive a cash distribution from the Corporation in
an amount equal to the excess of (A) the Take-Over Price of the shares
of Common Stock which are at the time vested under each surrendered
option (or surrendered portion thereof) over (B) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution.
(iv) The balance of the option (if any) shall continue in
full force and effect in accordance with the documents evidencing such
option.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each Eligible Director who is a non-employee Board member on
the date on which the Underwriting Agreement is executed and each Eligible
Director who is first elected or appointed as a non-employee Board member
after the Automatic Option Grant Program Effective Date shall automatically
be granted, on the date on which the Underwriting Agreement is executed or on
the date of such initial election or appointment (as the case may be), an
initial Non-Statutory Option to purchase 20,000 shares of Common Stock. No
eligible director may receive more than one initial 20,000-share option grant.
2. On the date of each Annual Shareholders Meeting, beginning
with the 1997 Annual Shareholders Meeting, each individual who is to continue
to serve as an Eligible Director after such meeting, shall automatically be
granted, whether or not such individual is standing for re-election as a
Board member at that Annual Shareholders Meeting, a Non-Statutory Option to
purchase an additional 1,000 shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months prior
to the date of such Annual Shareholders Meeting. There shall be no limit on
the number of such 1,000-share option grants any one Eligible Director may
receive over his or her period of Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder
is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each grant
shall vest, and the Corporation's repurchase right shall lapse, in a series
of three (3) equal and successive annual installments over the Optionee's
period of continued service as a Board member, with the first such
installment to vest upon the Optionee's completion of one (1) year of Board
service measured from the option grant date.
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E. EFFECT OF TERMINATION OF BOARD SERVICE. The following
provisions shall govern the exercise of any options held by the Optionee at
the time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution) shall
have a twelve (12)-month period following the date of such cessation of
Board service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the option
may not be exercised in the aggregate for more than the number of vested
shares of Common Stock for which the option is exercisable at the time
of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of such shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Board
service, terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of Board
service.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation
of the Corporate Transaction, each automatic option grant shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Each such option shall remain
exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him
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or her for a period of at least six (6) months. The Optionee shall in return
be entitled to a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the shares of Common Stock at the
time subject to the surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board shall be required in
connection with such option surrender and cash distribution.
D. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program, together with
the option grants outstanding thereunder, may not be amended at intervals
more frequently than once every six (6) months, other than to the extent
necessary to comply with applicable Federal income tax laws and regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee
to pay the option exercise price under the Discretionary Option Grant Program
by delivering a promissory note payable in one or more installments. The
terms of any such promissory note (including the interest rate and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee may
not exceed the sum of (i) the aggregate option exercise price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee in connection with the option
exercise.
B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights under the Plan
shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan (other than the options
granted under the Automatic Option Grant Program) with the right to use
shares of Common Stock in satisfaction of all or part of the Taxes incurred
by such holders in connection with the exercise of their options. Such right
may be provided to any such holder in either or both of the following formats:
(i) STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option, a portion of those shares with an
aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
(ii) STOCK DELIVERY: The election to deliver to the Corporation,
at the time the Non-Statutory Option is exercised, one or more shares of
Common Stock previously acquired by such holder (other than in connection
with the option exercise triggering the Taxes) with an aggregate Fair Market
Value equal to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Discretionary Option Grant Program became effective on the
Plan Effective Date and options may be granted under the Discretionary Option
Grant Program from and after the Plan Effective Date. The Automatic Option
Grant Program became effective on the
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Automatic Option Grant Program Effective Date. The Plan was approved by
shareholders in December 1995.
B. On February 15, 1996, the Board adopted a restatement of the Plan
to (i) increase the number of shares issuable under the Plan by 200,000
shares and (ii) limit the maximum number of shares that any Optionee may
receive in the aggregate over the term of the Plan to 360,000 shares,
exclusive of option grants and separately exercisable stock appreciation
rights made prior to January 1, 1996. These amendments were approved by the
Corporation's shareholders at the 1996 Annual Shareholders Meeting. The
provisions of the 1996 restatement of the Plan shall apply only to options
granted under the Plan from and after the effective date of such restatement.
All options issued and outstanding under the Plan immediately prior to the
1996 restatement of the Plan shall continue to be governed by the terms and
conditions of the Plan (and the instrument evidencing each such option) as in
effect on the date each such option was previously granted, and nothing in
the 1996 restatement shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such options with respect to the acquisition
of shares of Common Stock thereunder.
C. On March 21, 1997 the Board adopted a restatement of the Plan to
increase the number of shares issuable under the Plan by 400,000 shares,
subject to shareholder approval at the 1997 Annual Shareholders Meeting. The
provisions of the 1997 restatement of the Plan shall apply only to options
granted under the Plan from and after the effective date of such restatement.
All options issued and outstanding under the Plan immediately prior to the
1997 restatement of the Plan shall continue to be governed by the terms and
conditions of the Plan (and the instrument evidencing each such option) as in
effect on the date each such option was previously granted, and nothing in
the 1997 restatement shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such options with respect to the acquisition
of shares of Common Stock thereunder.
D. The Plan shall terminate upon the EARLIEST of (i) November 7,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options under the Plan
or (iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such Plan termination, all options outstanding
on such date shall thereafter continue to have force and effect in accordance
with the provisions of the documents evidencing such options.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, (i) no such
amendment or modification shall adversely affect the rights and obligations
with respect to options or stock appreciation rights at the time outstanding
under the Plan unless the Optionee consents to such amendment or
modification, and (ii) any amendment made to the Automatic Option Grant
Program (or any options outstanding thereunder) shall be in compliance with
the limitations of that program. In addition, the Board shall not, without
the approval of the Corporation's shareholders, (i) materially increase the
maximum number of shares issuable under the Plan, the number of shares for
which options may be granted under the Automatic Option Grant Program or the
maximum number of shares for which any one person may be granted options or
separately exercisable stock appreciation rights in the aggregate over the
term of the Plan, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase
the benefits accruing to Plan participants.
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B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program that are in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under those programs are held in escrow until there is
obtained shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If
such shareholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease
to be outstanding and (ii) the Corporation shall promptly refund to the
Optionees the exercise price paid for any excess shares issued under the Plan
and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow, and such shares
shall thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of
Common Stock upon the exercise of any option or stock appreciation right
shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options and stock appreciation rights granted under it and the shares of
Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such person's
Service at any time for any reason, with or without cause.
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE shall mean the date on
which the Plan is adopted by the Board.
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C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's shareholders which the Board does not recommend such
shareholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were still
in office at the time the Board approved such election or nomination.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
H. CORPORATION shall mean DeltaPoint, Inc., a California corporation.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
J. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
K. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
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L. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
M. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
N. FAIR MARKET VALUE PER SHARE OF COMMON STOCK ON ANY RELEVANT DATE shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which
such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
(iii) For purposes of option grants made on the date the
Underwriting Agreement is executed and the initial public offering price of
the Common Stock is established, the Fair Market Value shall be deemed to be
equal to the established initial offering price per share. For purposes of
option grants made prior to such date, the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors
as the Plan Administrator shall deem appropriate.
O. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through the following transaction:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's shareholders which the Board does not recommend such
shareholders to accept, and
(ii) more than fifty percent (50%) of the securities so acquired
are accepted from persons other than Section 16 Insiders.
P. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
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Q. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.
R. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee, any unauthorized use or disclosure by such
person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent
or Subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee or other person in the Service of the Corporation
(or any Parent or Subsidiary).
S. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
T. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
U. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
V. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
X. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set forth
in this document.
Y. PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons
under its jurisdiction.
A-xix
<PAGE>
Z. PLAN EFFECTIVE DATE shall mean the date on which the Plan is adopted by
the Board.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders.
BB. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section
414(p). The Plan Administrator shall have the sole discretion to determine
whether a Domestic Relations Order is a Qualified Domestic Relations Order.
CC. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant
Program with respect to eligible persons other than Section 16 Insiders.
DD. SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
EE. SECTION 12(g) REGISTRATION DATE shall mean the first date on which the
Common Stock is registered under Section 12(g) of the 1934 Act.
FF. SERVICE shall mean the provision of services to the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
GG.STOCK EXCHANGE shall mean either the American Stock Exchange or the New
York Stock Exchange.
HH. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
II. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price
per share.
JJ. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or
the vesting of those shares.
KK. 10% SHAREHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
LL.UNDERWRITING AGREEMENT shall mean the agreement between the Corporation
and the underwriter or underwriters managing the initial public offering of
the Common Stock.
A-xx
<PAGE>
DELTAPOINT, INC.
ANNUAL MEETING OF SHAREHOLDERS, JUNE 20, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DELTAPOINT, INC.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Shareholders to be held on June 20, 1997, and
the Proxy Statement and appoints Donald B. Witmer and William G. Pryor, and
each of them, the Proxy of the undersigned, with full power of substitution, to
vote all shares of Common Stock of DeltaPoint, Inc. (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf
of any entity or entities, at the Annual Meeting of Shareholders to be held at
22 Lower Ragsdale Drive, Monterey, California on Friday, June 20, 1997, at
10:00 a.m. local time and at any adjournment or postponement thereof (the
"Annual Meeting"), with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this Proxy
shall be voted in the manner set forth on the reverse side.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
/X/ Please mark votes
as in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED BELOW
AND A VOTE FOR THE OTHER PROPOSALS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS SPECIFIED BELOW. THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED BELOW AND FOR THE OTHER PROPOSALS IF NO SPECIFICATION IS MADE.
<TABLE>
<S> <C> <C> <C>
1. To elect the following directors to serve for a term ending upon the 1998 Annual
Meeting of Shareholders or until their successors are elected and qualified:
NOMINEES: JEFFREY F. AIT, DONALD B. WITMER, JOHN HUMMER,
PATRICK GRADY
FOR WITHHOLD
ALL AUTHORITY TO
/ / / /
NOMINEES VOTE FOR ALL
NOMINEES
/ / ------------------------------------------------------------------------
For all nominees, except for any nominee(s) whose name is written in the space provided
above.
2. To approve amendment to the Company's 1995 Stock FOR AGAINST ABSTAIN
Option Plan to increase the number of shares of / / / / / /
Common Stock authorized for issuance from 820,000
to 1,220,000.
3. To ratify the appointment of Price Waterhouse FOR AGAINST ABSTAIN
LLP as the Company's independent auditors for the / / / / / /
fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the Annual Meeting and
at any adjournment or postponement thereof.
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
</TABLE>
Please sign your name.
Signature: ___ Date: ____________________
Signature: ___ Date: ____________________
