<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
ONYX ACCEPTANCE CORPORATION
- --------------------------------------------------------------------------------
(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] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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> 2
ONYX ACCEPTANCE CORPORATION
8001 IRVINE CENTER DRIVE, 5TH FLOOR
IRVINE, CA 92618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of Onyx Acceptance Corporation, a
Delaware corporation (the "Company"), will be held at the Corporate Headquarters
of the Company located at 8001 Irvine Center Drive, 5th Floor, Irvine,
California, on May 20, 1998, at 10:00 a.m. for the following purposes:
1. To elect two directors, each to serve a three year term;
2. To approve an amendment to the Company's 1996 Stock Option/Stock
Issuance Plan (the "1996 Plan"), including (i) a 200,000-share increase in
the maximum number of shares of Common Stock authorized for issuance under
the 1996 Plan, (ii) implementation of an automatic share increase feature
pursuant to which the number of shares available for issuance under the
1996 plan will automatically increase on the first trading day of each
calendar year, beginning in the 1999 calendar year, by an amount equal to
three percent (3%) of the total number of shares of Common Stock
outstanding on the last trading day of the immediately preceding calendar
year and (iii) an increase in the number of shares of Common Stock subject
to options granted under the Automatic Option Grant Program of the 1996
Plan.
3. To ratify the appointment of Coopers & Lybrand, L.L.P. as
independent accountants of the Company for the fiscal year ending December
31, 1998; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
The Board of Directors has fixed March 31, 1998 as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE
AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE
ENCLOSED.
By Order of the Board of Directors
Regan E. Kelly
Assistant Secretary
Irvine, California
April 17, 1998
<PAGE> 3
ONYX ACCEPTANCE CORPORATION
8001 IRVINE CENTER DRIVE, 5TH FLOOR
IRVINE, CALIFORNIA 92618
------------------------
PROXY STATEMENT
------------------------
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Onyx Acceptance Corporation, a Delaware corporation (the
"Company"), in connection with the Annual Meeting of Stockholders to be held at
10:00 a.m. on May 20, 1998, at the Corporate Headquarters, 8001 Irvine Center
Drive, 5th Floor, Irvine, California, and at any and all postponements and
adjournments thereof.
This Proxy Statement and accompanying proxy will first be mailed to
stockholders on or about April 17, 1998. The costs of solicitation of proxies
will be paid by the Company. In addition to soliciting proxies by mail, the
Company's officers, directors and other regular employees, without additional
compensation, may solicit proxies personally or by other appropriate means. The
Company will reimburse brokers, banks, fiduciaries and other custodians and
nominees holding Common Stock in their names or in the names of their nominees
for their reasonable charges and expenses in forwarding proxies and proxy
materials to the beneficial owners of such Common Stock.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of the Company's Common Stock of record as of March 31,
1998, will be entitled to vote at the Annual Meeting. On March 31, 1998, there
were outstanding 6,026,563 shares of Common Stock, which constituted all of the
outstanding voting securities of the Company. Each share of Common Stock is
entitled to one vote on all matters to come before the Annual Meeting.
Assuming a quorum is present, the affirmative vote of a plurality of the
votes cast will be required for approval of Proposal 1 (election of directors)
an affirmative vote of a majority of the votes cast will be required for the
approval of Proposal 2 (approval of amendment to the Company's 1996 Stock
Options/Stock Issuance Plan (the "1996 Plan"), and the affirmative vote of a
majority of the votes cast will be required for the approval of Proposal 3
(ratification of the election of independent accountants) and to act on all
other matters to come before the Annual Meeting. For purposes of determining the
number of votes cast with respect to any voting proposal, the sum of votes cast
and abstentions are included. Abstentions with respect to any proposal are
counted as "shares present" and have the effect of a vote "against" such
proposal as to which they are specified. Broker non-votes with respect to any
proposal are not considered "shares present" and, therefore, have the effect of
reducing the number of affirmative votes required to achieve a majority of the
votes cast for such proposal. Broker non-votes will be counted for the purpose
of determining whether a quorum is present.
REVOCABILITY OF PROXIES
Proxies must be written, signed by the stockholder and returned to the
Assistant Secretary of the Company. Any stockholder who signs and returns a
proxy may revoke it at any time before it is voted by filing with the Assistant
Secretary of the Company a written revocation or a duly executed proxy bearing a
date later than the date of the proxy being revoked. Any stockholder attending
the Annual Meeting in person may withdraw such stockholder's proxy and vote such
stockholder's shares.
<PAGE> 4
ELECTION OF DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, and their ages and
positions as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas C. Stickel(1)(2) 48 Chairman of the Board
John W. Hall 36 President, Chief Executive Officer and
Director
Don P. Duffy 43 Executive Vice President and Chief
Financial Officer
Regan E. Kelly 46 Executive Vice President and General
Counsel
Frank Marraccino 42 Executive Vice President
Eugene J. Warner, Jr. 54 Executive Vice President
Bruce R. Hallett(1) 41 Secretary and Director
Robert A. Hoff(2) 45 Director
G. Bradford Jones(2) 42 Director
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
The Company's Amended and Restated Certificate of Incorporation provides
for the Board of Directors to be divided into three classes, with each class to
be as nearly equal in number of directors as possible. At each annual meeting of
the stockholders, the successors to the class of directors whose term expires at
the time are elected to hold office for a term of three years, and until their
respective successors are elected and qualified, so that the term of one class
of directors expires at each such annual meeting. The terms of office expires as
follows: Mr. Stickel and Mr. Hall, 1998; and Mr. Hoff and Mr. Jones, 1999 and
Mr. Hallett and Mr. Duffy, 2000.
Officers are elected by, and serve at the discretion of, the Board of
Directors. There are no family relationships among the directors or executive
officers. In January, 1994, the Company established a Compensation Committee. In
March, 1995, the Company established an Audit Committee.
At the Annual Meeting, two nominees, Thomas C. Stickel and John W. Hall are
nominated for election, each Director to serve until 2001 and until his
successor is elected and qualified. Nominee Stickel has been a director since
1995 and Chairman of the Board since May, 1996. Nominee Hall has served as
President and a Director of the Company since August 1993 and as Chief Executive
Officer since September, 1996. The following information is submitted concerning
the directors and executive officers of the Company, including nominees for
election, Thomas C. Stickel and John W. Hall.
Thomas C. Stickel has served as a Director of the Company since April 1995
and as Chairman of the Board since May, 1996. Mr. Stickel is Chairman and
Founder of University Ventures Network, a company providing business and capital
interface between major universities. Mr. Stickel is also Chairman and Founder
of American Partners Capital Group, a corporation specializing in pension fund
investment, design and development. As Chairman of American Partners Capital
Group, Mr. Stickel is responsible for overseeing the company's core operations
as well as the activities of its board of directors. In 1992, Mr. Stickel
founded American Partners, Inc., a corporation specializing in Latin American
business development, and served as its Chairman until 1994. From 1983 to 1992,
Mr. Stickel served as the Chairman and Chief Executive Officer of TCS
Enterprises, Inc., a financial services holding company. Mr. Stickel served on
the Board of Directors of Catellus Development Corporation from 1993-1996. Mr.
Stickel also serves as a director of San Diego Gas and Electric Company and
several privately held companies.
John W. Hall has served as President, and as a Director of the Company
since August 1993 and as Chief Executive Officer since September, 1996. From
1988 to 1993, Mr. Hall was the M.I.S. Director of Western Financial Savings Bank
("WFS"), developing and implementing operational technology with an emphasis on
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<PAGE> 5
the Auto Finance Division. From 1985 to 1988, Mr. Hall was a founder and
president of Micro Advantage, a developer and seller of software products for
the business education industry. From 1983 to 1985, Mr. Hall was Assistant
Director of Data Processing for a Los Angeles school district in Southern
California.
Don P. Duffy has served as an Executive Vice President and as the Chief
Financial Officer of the Company since October 1993 and as a Director of the
Company since January, 1997. From 1988 to October 1993, Mr. Duffy was a Senior
Manager for Ernst & Young, specializing in the financial services industry. As a
senior manager at Ernst & Young, Mr. Duffy was responsible for managing
engagements to banks, savings institutions and finance companies with assets
ranging from $100 million to $3 billion. Mr. Duffy was responsible for public
offerings of over $2 billion of automobile collateralized bonds and pass-
through certificates. From 1981 through 1988, Mr. Duffy held other positions
with Ernst & Young and its predecessor.
Regan E. Kelly has served as an Executive Vice President and General
Counsel of the Company since August 1993. From 1985 to August 1993, Mr. Kelly
served as Vice President, Secretary and General Counsel for Westcorp, where he
was responsible for the legal aspects of all debt, equity, and securitization
offerings and coordinated all filings with the Securities and Exchange
Commission and Office of Thrift Supervision. Mr. Kelly was a member of the Board
of Directors of Western Financial Savings Bank ("WFS") from 1986 to 1993 and
from 1989 to August 1993, Mr. Kelly held the position of President of Western
Financial Auto Loans 2, Inc., the finance subsidiary of WFS through which WFS
securitized and sold its automobile receivables.
Frank Marraccino has served as a Senior Vice President of the Company since
1993 and as Executive Vice President since 1996. Mr. Marraccino is responsible
for all Auto Finance Centers and the purchase of auto receivables nationwide.
From 1981 to 1993, Mr. Marraccino worked for Western Financial Savings Bank and
served in varying capacities, including Dealer Center Manager and Collection
Manager. In 1992 and 1993, Mr. Marraccino was responsible for production and
servicing of the auto receivables portfolio of Western Financial Savings Bank.
Bruce R. Hallett has served as a Director and Secretary of the Company
since November 1993. Since February 1993, Mr. Hallett has been a partner in the
law firm of Brobeck, Phleger & Harrison LLP and Managing Partner at the firm's
Orange County office since 1995. From January 1989 until February 1993, Mr.
Hallett was a partner in the law firm of Morrison & Foerster LLP.
Robert A. Hoff has served as a Director of the Company since November 1993.
Since 1983, Mr. Hoff has been General Partner of Crosspoint Venture Partners, a
private venture capital investment company where he is responsible for making
capital investments into emerging companies and, thereafter, conducting
oversight of such investments through consulting and service on boards of
directors. Mr. Hoff also serves as a director of the National Venture Capital
Association and as a director of several privately-held companies.
G. Bradford Jones has been a Director of the Company since November 1993.
Mr. Jones is currently a General Partner in the venture capital firm of
Brentwood Associates, which he joined in 1981 and where he is responsible for
making capital investments into emerging companies and, thereafter, conducting
oversight of such investments through consulting and service on boards of
directors. Mr. Jones also currently serves as a Director of Interpore
International, a manufacturer of synthetic bone graft materials for orthopedic
use, Plasma & Materials Technologies, Inc., a manufacturer of advanced etching
and deposition equipment for the semiconductor industry, and ISOCOR, a vendor of
electronic information exchange software. Mr. Jones is also a director of
several privately-held companies.
Mr. Warner joined Onyx in December 1996 as Executive Vice President of
Collections. Mr. Warner has over 29 years experience in the financial services
industry in both lending and collections. He has helped to design and implement
a number of collection and operations systems and is a leader in the industry in
this area. He also has a depth of experience in automobile financing in both the
direct and indirect financing which brings added depth to his position and
enables him to be involved in helping to improve credit risk standards and
pricing as well as dealing with other related issues. Mr. Warner's prior
experience includes 6 1/2 years as Senior Vice President of Collections for
Consumer Portfolio Services, 3 1/2 years with Far Western Bank where
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<PAGE> 6
he served as Vice President of Collection Administration, 14 years in the Thrift
& Loan industry serving as Regional Vice President and 5 years in consumer
finance with Household Finance.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and each of the
four additional most highly compensated executive officers (the "Named Executive
Officers") for the years ended December 31, 1997, December 31, 1996 and December
31, 1995 whose compensation was in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
NAME AND PRESENT YEAR ENDED ---------------------------------- UNDERLYING
PRINCIPAL POSITION DECEMBER SALARY BONUS OPTIONS(1)(3)
------------------ ---------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
John W. Hall.................................... 1997 $318,000 -- 75,000
President, Chief Executive Officer 1996 $318,000 -- 51,021
and Director 1995 193,000 $110,542 6,293
Don P. Duffy.................................... 1997 178,600 -- 25,000
Chief Financial Officer and 1996 161,083 -- 4,373
Executive Vice President 1995 138,180 33,000 --
Frank Marraccino................................ 1997 167,302 15,000 20,000
Executive Vice President 1996 169,775 -- 29,373
1995 105,000 39,107 --
David Mac Innis................................. 1997 130,050 -- 5,000
Senior Vice President 1996 113,414 21,303 4,373
1995 100,000 18,542 3,207
Eugene J. Warner, Jr. (2)....................... 1997 $140,000 -- --
</TABLE>
- ---------------
(1) No restricted stock grants were made to any of the Named Executive Officers
during the 1997 fiscal year.
(2) Joined Company in December, 1996.
(3) Stock options for shares of Onyx awarded in the year indicated and
exercisable in the future.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers for the year ended December 31,
1997. No stock appreciation rights were granted to these individuals during such
year:
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PER SHARE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE ---------------------------
NAME GRANTED FISCAL YEAR PRICE(2) EXPIRATION DATE 5% 10%
---- ---------- -------------- ---------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Hall........... 75,000(3) 18.6% $ 8.00 January 2, 2007 $977,337 $1,556,245
Don P. Duffy........... 25,000(3) 6.2% $ 8.00 January 2, 2007 322,102 518,748
Frank L. Marraccino.... 20,000(3) 5.0% $ 8.00 January 2, 2007 260,623 414,999
David Mac Innis........ 5,000(3) 1.2% $ 8.00 January 2, 2007 65,156 103,750
Eugene J. Warner, Jr... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are permitted by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market
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<PAGE> 7
price of the Common Stock appreciates over the option term, no value will be
realized from the option grants made to the executive officers.
(2) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the date of exercise or pursuant to a cashless exercise
procedure involving a same-day sale of the purchased shares.
(3) Option was granted on January 2, 1997 of which 25% was exercisable at the
one year anniversary of grant, with remainder vesting ratably over a 36
month period.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning the value of
unexercised options held by each of the Named Executive Officers for the year
ended December 31, 1997. No options or stock appreciation rights were exercised
during such year and no stock appreciation rights were outstanding at the end of
that year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT FISCAL YEAR
OPTIONS AT FISCAL YEAR END END(1)
SHARES ACQUIRED VALUE ------------------------------ ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Hall.............. -- -- 85,043 103,699 $408,553 --
Don P. Duffy.............. -- -- 29,307 29,222 $198,339 $12,749
Frank L. Marracino........ -- -- 10,767 38,606 -- --
David Mac Innis........... -- -- 10,951 7,460 $ 48,069 --
Eugene J. Warner, Jr...... -- -- 26,042 33,958 -- --
</TABLE>
- ---------------
(1) Based on the fair market value of the option shares at fiscal year-end
($7.75 per share) less the exercise price ($.51 per share) payable for such
shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are Messrs. Hoff and Jones. None of these individuals was at any time
during the year ended December 31, 1997 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 which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
None of the Company's executive officers have employment agreements with
the Company, and their employment may be terminated at any time at the
discretion of the Board of Directors. Stock options granted under the Company's
1996 Plan may be accelerated at the discretion of the Board in the event of a
change of control of the Company or in the event of an involuntary termination
following a change of control.
DIRECTOR REMUNERATION
The directors do not receive compensation for services on the Board of
Directors or any committee thereof but are reimbursed for their out-of-pocket
expenses in serving on the Board of Directors. Certain non-employee members of
the Board of Directors have been granted options to purchase shares of the
Company's Common Stock from time to time in connection with their appointment to
and performance on the Board of Directors. Additionally, each of the
non-employee members of the Board of Directors is eligible to receive options to
purchase Common Stock under the 1996 Plan's Automatic Option Grant Program.
Under the Automatic Option Grant Program, at each annual Stockholders
Meeting each individual with at least six months of Board service who is to
continue to serve as a non-employee Board Member after the
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<PAGE> 8
meeting will receive an option grant to purchase 2,000 shares of Common Stock,
whether or not such individual has been in the prior employ of the Company or
joined the Board prior to the Offering.
Each automatic grant will have a term of 10 years, subject to earlier
termination following the optionee's cessation of Board service. Each automatic
option will be immediately exercisable; however, any shares purchased upon
exercise of the option will be subject to repurchase should the optionee's
service as a non-employee Board member cease prior to vesting in the shares. The
initial 8,000-share grant will vest in successive equal quarterly installments
over the optionee's initial four year period of Board service. Each additional
2,000-share grant will vest upon the optionee's completion of one year of Board
service measured from the grant date. However, each outstanding option will
immediately vest upon (i) certain changes in the ownership or control of the
Company or (ii) the death or disability of the optionee while serving as a Board
member.
Director Hallett received a grant in 1997 in the amount of 2,000 shares.
The non-employee directors will receive a grant of 2,000 shares each following
the Annual Shareholders Meeting in 1998.
REPORT OF THE COMPENSATION COMMITTEE
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives.
COMPENSATION PHILOSOPHY
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies,
plans and programs which seek to enhance the profitability of the Company, and
thus shareholder value, by aligning closely the financial interests of the
Company's senior managers and employees with those of its shareholders. The
Compensation Committee endorses the belief that stock ownership by a significant
percentage of the Company's employees including the granting of stock options to
employees furthers that goal and fosters decision-making by its employees with
the Company's long-term performance in mind.
The compensation plans and programs are structured to integrate pay with
the Company's annual and long-term performance goals. The plans and programs are
designed to recognize initiative and achievement and to assist the Company in
attracting and retaining qualified employees. In furtherance of these goals,
annual base salaries are generally set at competitive levels and the Company
relies to a large degree on annual incentive compensation to attract and retain
key employees with outstanding abilities and to motivate them to perform to the
full extent of their abilities. For the longer term, incentive stock options are
awarded by the Company, the stock of which is traded on NASDAQ. Incentive
compensation is variable and closely tied to corporate, business unit and
individual performance in a manner that encourages a sharp and continuing focus
on building profitability and shareholder value. As a result of the increased
emphasis on tying executive compensation to corporate performance, in any
particular year the total compensation of the Company's executives may be more
or less than the executives of the Company's competitors, depending upon the
Company's or the individual business unit's performance.
In evaluating the performance and setting the incentive compensation of the
Chief Executive Officer and other senior executives, the Compensation Committee
takes into account their commitment to long-term success of the Company through
management of their respective units as dictated by existing and anticipated
market conditions. Certainly, the Compensation Committee expects and rewards
recognition by the Chief Executive Officer and senior executives of managing in
both adverse and advantageous market conditions for each of the Company's major
divisions.
At the beginning of each year, performance goals to determine annual
incentive compensation are established for each executive. Financial goals
include loan volume growth, operating earnings, loan losses, delinquency levels,
cost controls, productivity and profitability. Certain members of senior
management have their bonuses tied exclusively to earnings per share.
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<PAGE> 9
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining the Chief Executive Officer's compensation for 1997, the
Compensation Committee discussed and considered all of the factors discussed
above in the overall context of the Company's performance in 1997. The
Compensation Committee acknowledged the continued focus on purchasing quality
auto contracts, building infrastructure, managing the performance of the auto
contracts portfolio, especially in light of the Company's North Hollywood Office
difficulties, and the Company's continued expansion and growth. Significant
emphasis is placed on the above relative to measuring the quality of the Chief
Executive Officer's performance. However, for the purpose of achieving a bonus,
the Committee relies exclusively on earnings per share and the Company did not
meet the objectives set out by the Committee at the beginning of 1997 and
therefore the Chief Executive Officer did not receive a bonus for 1997.
STOCK OPTION GRANTS
Onyx Acceptance Corporation uses stock options as long-term incentives and
expects that it will continue to issue this compensation alternative in the
future. In 1996, the Company adopted a new stock option plan that made 600,000
shares of Common Stock of the Company available for just such purposes. The Onyx
Compensation Committee grants incentive stock options and, in certain
circumstances, non-qualified stock options to employees of the Company and views
such grants less as compensation and more as an incentive mechanism. Grants were
made in 1997 to some executives as shown in the Summary Compensation Table, and
to other key employees, which are in the appropriate tables.
POLICY REGARDING COMPLIANCE WITH I.R.C. SECTION 162(M)
Section 162(m) of the Internal Revenue Code, as enacted by the Omnibus
Budget Reconciliation Act of 1993, provides in general that, beginning in 1994,
compensation paid to certain executives of publicly held corporations will not
be deductible for federal income tax purposes to the extent it exceeds
$1,000,000 per year unless certain conditions are met. It is the present policy
of the Compensation Committee that individual compensation shall not exceed the
deductibility requirements of Internal Revenue Code, Section 162(m) and the
Company intends to take the necessary steps to comply, but also reserves the
right to enter into incentive and other compensation arrangements that do not
comply when it determines that the benefits to the Company outweigh the cost of
the possible loss of federal income tax deductions.
COMPENSATION COMMITTEE
Robert A. Hoff
G. Bradford Jones
7
<PAGE> 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH OFFICERS AND DIRECTORS
In December 1994, the Company loaned $175,000 to John Hall, who is the
Company's Chief Executive Officer, President and a director of the Company. This
loan is evidenced by a promissory note (the "Note") with interest at 6.66% per
annum. All principal and accrued interest under the Note is due on December 20,
1998 pursuant to a one year extension granted by the Company's Board of
Directors. In connection with this loan, Mr. Hall granted the Company an option
(the "Company Option") to repurchase, at a price per share of $18.87, up to
9,277 shares of Common Stock owned by Mr. Hall. The Company Option is
exercisable through December 20, 1998.
RELATIONSHIP OF COMPANY TO BROBECK, PHLEGER & HARRISON LLP
Bruce R. Hallett, the Company's Secretary and a director, is a partner in
the law firm of Brobeck, Phleger & Harrison LLP ("Brobeck"). As of December 31,
1997, members of Brobeck beneficially owned 24,899 shares of the Company's
Common Stock. Brobeck has served as the Company's counsel since inception. For
the year ended December 31, 1997, the Company paid Brobeck approximately
$400,000 for legal services and costs incurred in connection with the Company's
operations, including its securitizations.
COMPANY PROPOSALS
The following proposals will be submitted for stockholder consideration and
voting at the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The following persons are nominated for election as directors, to hold
office for a term of three years expiring at the third succeeding Annual
Meeting:
Thomas C. Stickel
John W. Hall
The nominees listed above are current members of the Board of Directors.
All proxies received by the Board of Directors will be voted for the nominees if
no directions to the contrary are given. In the event that the nominees are
unable or decline to serve, an event that is not anticipated, the proxies will
be voted for the election of nominees designated by the Board of Directors, or
if none are so designated, will be voted according to the judgment of the person
or persons voting the proxy.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors. Votes withheld from
any director are counted for purposes of determining the presence or absence of
a quorum for the transaction of business, but have no other legal effect. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES.
PROPOSAL 2
AMENDMENT OF 1996 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve a series of
amendments to the Company's 1996 Stock Option/Stock Issuance Plan (the "1996
Plan") which will effect the following changes:
(i) increase the maximum number of shares of Common Stock authorized
for issuance over the term of the 1996 Plan by 200,000 shares, from
1,133,304 shares to 1,333,304 shares,
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<PAGE> 11
(ii) implement an automatic share increase feature pursuant to which
the number of shares available for issuance under the 1996 Plan will
automatically increase on the first trading day of each calendar year,
beginning in calendar year 1999, by an amount equal to three percent (3%)
of the total number of shares of Common Stock outstanding on the last
trading day of the immediately preceding calendar year,
(iii) allow unvested shares issued under the 1996 Plan and
subsequently repurchased by the Company at the purchase price paid per
share to be reissued under the 1996 Plan,
(iv) increase the number of shares of Common Stock subject to the
automatic option grants to be made to the non-employee Board members under
the Automatic Option Grant Program from 8,000 shares to 10,000 shares for
the initial automatic grants and from 2,000 shares to 7,000 shares for the
annual automatic grants,
(v) provide that the initial automatic option grants under the
Automatic Option Grant Program will vest in a series of twenty-four (24)
successive equal monthly installments upon the optionee's completion of
each month of Board service over the twenty-four (24)-month period measured
from the grant date and that the annual automatic option grants will vest
in a series of twelve (12) equal monthly installments upon the optionee's
completion of each month of Board service over the twelve (12) month period
measured from the grant date,
(vi) make the non-employee Board members who are serving as Plan
Administrator eligible for discretionary grants and direct stock issuances
under the Discretionary Option Grant and Stock Issuance Programs in effect
under the 1996 Plan;
(vii) remove certain restrictions on the eligibility of non-employee
Board members to serve as Plan Administrator, and
(viii) effect a series of additional changes to the provisions of the
1996 Plan, including the stockholder approval requirements, the
transferability of non-statutory stock options and the elimination of the
six (6)-month holding period requirement as a condition to the exercise of
stock appreciation rights, in order to take advantage of the most recent
amendments to Rule 16b-3 of the Securities and Exchange Commission which
exempts certain officer and director transactions under the 1996 Plan from
the short-swing liability provisions of the federal securities laws.
The share increase provisions (including the annual three percent (3%)
increase) will assure that a sufficient reserve of Common Stock is available
under the 1996 Plan to attract and retain the services of key individuals
essential to the Company's long-term growth and success. The remaining
amendments will provide the Company with more opportunities to make equity
incentives available to the non-employee Board members as an inducement for
their continued service and will facilitate plan administration by eliminating a
number of limitations and restrictions previously incorporated into the 1996
Plan to comply with the applicable requirements of SEC Rule 16b-3 prior to its
most recent amendment.
The 1996 Plan is the successor to the Company's 1994 Stock Option Plan and
1994 Special Performance Option Grant Plan (the "Predecessor Plans"). The 1996
Plan became effective upon its adoption by the Board on February 28, 1996 (the
"Effective Date") and was approved by the Company's stockholders on February 28,
1996. The Board adopted the amendments to the 1996 Plan that are the subject of
this Proposal on January 2, 1998, subject to stockholder approval at the Annual
Meeting.
On April 23, 1998, the Board also adopted the Company's Special Non-Officer
Stock Option Plan pursuant to which a reserve of 170,000 shares of Common Stock
are available for issuance only to non-officer employees of the Company.
The following is a summary of the principal features of the 1996 Plan, as
most recently amended. However, the summary does not purport to be a complete
description of all the provisions of the 1996 Plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Corporate Secretary at the Company's principal executive
offices in Irvine, California.
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<PAGE> 12
Equity Incentive Programs
The 1996 Plan contains three (3) separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) an Automatic Option Grant Program, and
(iii) a Stock Issuance Program. The principal features of these programs are
described below. The 1996 Plan (other than the Automatic Option Grant Program)
is administered by the Compensation Committee of the Board. The Compensation
Committee acting in such administrative capacity (the "Plan Administrator") has
complete discretion (subject to the provisions of the 1996 Plan) to authorize
option grants and direct stock issuances under the 1996 Plan. Pursuant to
provisions in the 1996 Plan, the Board may appoint a Secondary Committee of one
or more Board members, including employee directors, to authorize option grants
and direct stock issuances to eligible persons other than executive officers and
Board members subject to the short-swing liability provisions of the federal
securities laws. All grants under the Automatic Option Grant Program are to be
made in strict compliance with the provisions of that program, and no
administrative discretion will be exercised by the Plan Administrator with
respect to the grants made under such program. Stockholder approval of this
Proposal will also constitute pre-approval of each option which is granted on or
after the date of the Annual Meeting pursuant to the provisions of the Automatic
Option Grant Program and the subsequent exercise of each such option in
accordance with those provisions.
Share Reserve
A total of 1,333,304 shares of Common Stock has been reserved for issuance
over the term of the 1996 Plan, assuming stockholder approval of the
200,000-share increase which forms part of this Proposal. Should stockholders
approve this Proposal, then the number of shares available for issuance under
the 1996 Plan will automatically increase on the first trading day of each
calendar year, beginning with the 1999 calendar year, by three percent (3%) of
the total number of shares outstanding on the last trading day of the
immediately preceding calendar year. In no event may any one participant in the
1996 Plan be granted options and direct stock issuances for more than 500,000
shares in the aggregate over the term of the 1996 Plan.
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the securities issuable (in the aggregate and to each participant) under
the 1996 Plan and to the securities and exercise price under each outstanding
option.
Should an option expire or terminate for any reason prior to exercise in
full or be canceled in accordance with the provisions of the 1996 Plan, the
shares subject to the portion of the option not so exercised or canceled will be
available for subsequent issuance under the 1996 Plan. Unvested shares issued
under the 1996 Plan and subsequently repurchased by the Company at the original
option exercise or direct issue price paid per share will also be added back to
the share reserve and will accordingly be available for subsequent issuance
under the 1996 Plan. Shares subject to any option surrendered in accordance with
the stock appreciation right provisions of the 1996 Plan will not be available
for subsequent issuance.
Eligibility
Employees of the Company or any parent or subsidiary, non-employee members
of the Board or the board of directors of any parent or subsidiary corporation,
and consultants and other independent advisors in the service of the Company or
its parent or subsidiary corporations will be eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. Non-employee members of
the Board will also be eligible to participate in the Automatic Option Grant
Program.
As of March 31, 1998, five (5) executive officers, four (4) non-employee
Board members and approximately 392 other employees were eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs, and the four (4)
non-employee Board members were also eligible to participate in the Automatic
Option Grant Program.
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<PAGE> 13
Valuation
The fair market value per share of Common Stock on any relevant date under
the 1996 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On March 31, 1998, the closing selling price per share
was $10.875.
DISCRETIONARY OPTION GRANT PROGRAM
Options granted under the Discretionary Option Grant Program will have an
exercise price per share not less than 85% of the fair market value per share of
Common Stock on the option grant date. No granted option will have a term in
excess of ten (10) years. The options will generally become exercisable in a
series of installments over the optionee's period of service with the Company.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any shares in which the
optionee is vested at that time. The Plan Administrator will have 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 or vesting 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 Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made 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 over (b) the
aggregate exercise price payable for those shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
Limited stock appreciation rights may be provided to one or more
non-employee Board members or officers of the Company as part of their
option grants. Any option with such a limited stock appreciation right may
be surrendered to the Company upon the successful completion of a hostile
tender offer for more than 50% of the Company's outstanding voting stock.
In return for the surrendered option, the officer will be entitled to a
cash distribution from the Company in an amount per surrendered option
share equal to the excess of (a) the highest price paid per share of Common
Stock in connection with the tender offer over (b) the exercise price
payable for such share.
The Plan Administrator will also have the authority to effect the
cancellation of outstanding options under the Discretionary Option Grant Program
(including outstanding options under the Predecessor Plans) and to issue
replacement options with an exercise price based on the fair market price of
Common Stock at the time of the new grant.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who was serving
as a non-employee Board member at the time of the Company's initial public
offering was automatically granted at that time a non-statutory option to
purchase 8,000 shares of Common Stock, and each individual who was first elected
or appointed as a non-employee Board member on or after the Company's initial
public offering was automatically granted, at the time of such election or
appointment, a non-statutory option to purchase 8,000 shares of Common Stock. In
addition, on the date of the 1997 Annual Stockholders Meeting, each continuing
non-employee Board member who had served as a non-employee Board member was
granted a non-statutory option to purchase 2,000 shares of Common Stock. Subject
to approval of this Proposal, each individual who is first elected or appointed
as a non-employee Board member on or after the date of the Annual Meeting will
automatically receive, at the time of such initial election or appointment, a
non-statutory option under the Automatic Option Grant Program to purchase 10,000
shares of Common Stock. In addition, on the date of each Annual Meeting,
beginning with the 1999 Annual Meeting, each individual who is to continue to
serve as a non-employee Board member will automatically be granted a
non-statutory option to
11
<PAGE> 14
purchase 7,000 shares of the Company's Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months. There
will be no limit on the number of such 7,000-share option grants that any one
non-employee Board member may receive over his or her period of Board service.
Each 10,000-share or 7,000-share option granted under the Automatic Option
Grant Program will have an exercise price per share equal to 100% of the fair
market value per share of Common Stock on the option grant date and a maximum
term of ten (10) years measured from the grant date, subject to earlier
termination at the end of the twelve (12)-month period measured from the date of
the optionee's cessation of Board service. Each 10,000-share or 7,000-share
option will be immediately exercisable for all the option shares. However, any
shares purchased under the option will be subject to repurchase by the Company,
at the option exercise price paid per share, upon the optionee's cessation of
Board service prior to vesting in those shares.
The shares subject to each initial 10,000-share automatic option grant will
vest in a series of twenty-four (24) successive equal annual installments upon
the optionee's completion of each month of Board service over the twenty-four
(24)-month period measured from the grant date and the shares subject to each
annual 7,000-share grant will vest in a series of twelve (12) successive equal
monthly installments upon the optionee's completion of each month of Board
service over the twelve (12)-month period measured from the grant date.
Currently, the initial automatic options vest in a series of sixteen (16) equal
quarterly installments, subject to the optionee's continued Board service over
that period, and the annual automatic grants vest upon the optionee's completion
of one (1) year of Board service measured from the grant date. Should the
optionee cease to serve as a Board member, the optionee will generally have
until the earlier of (i) the twelve (12)-month period following such cessation
of service or (ii) the expiration date of the option term in which to exercise
the option for the number of shares that are vested at the time of such
individual's cessation of Board service.
The shares subject to each automatic option grant will immediately vest in
full upon (i) the optionee's death or permanent disability while a Board member,
(ii) an acquisition of the Company by merger or asset sale, (iii) the successful
completion of a tender offer for more than 50% of the Company's outstanding
voting stock or (iv) a change in the majority of the Board effected through one
or more proxy contests for Board membership. In addition, upon the successful
completion of a hostile tender offer for more than 50% of the Company's
outstanding voting stock, each automatic option grant may be surrendered to the
Company for a cash distribution per surrendered option share in an amount equal
to the excess of (a) the highest price per share of Common Stock paid in
connection with such tender offer over (b) the exercise price payable for such
share. Stockholder approval of this Proposal will also constitute pre-approval
of each option granted on or after the date of the Annual Meeting with such a
surrender right and the subsequent surrender of that option in accordance with
foregoing provisions.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share
not less than 85% of the fair market value on the issuance date, payable in cash
or through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the discretionary
authority at any time to accelerate the vesting of any and all unvested shares
outstanding under the 1996 Plan.
GENERAL PROVISIONS
Acceleration
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation will automatically accelerate in full,
and all unvested shares under the Discretionary Option Grant and Stock Issuance
Programs will immediately vest, except to the extent the Company's repurchase
rights with respect
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<PAGE> 15
to those shares are to be assigned to the successor corporation. In addition,
any options assumed in connection with such acquisition will automatically
accelerate, and any unvested shares which do not vest at the time of such
acquisition will immediately vest, upon the individual's involuntary termination
of service with the successor entity within 18 months following the acquisition.
The Plan Administrator also has authority to grant options which will
automatically vest (and structure repurchase rights which will automatically
terminate) upon an acquisition whether or not the option is to be assumed (or
the repurchase rights are to be assigned), or to grant options which will not
accelerate (and structure repurchase rights which will not terminate) whether or
not such options are to be assumed (or such repurchase rights are to be
assigned), in connection with an acquisition.
In connection with a change in control of the Company, whether by
successful tender offer for more than 50% of the outstanding voting stock or a
change in the majority of the Board by one or more contested elections for Board
membership, the Plan Administrator will have the discretionary authority to
provide for automatic acceleration of outstanding options under the
Discretionary Option Grant Program and the automatic vesting of all unvested
shares outstanding under the Discretionary Option Grant and Stock Issuance
Programs, with such acceleration or vesting to occur either at the time of such
change in control or upon a subsequent involuntary termination of the
individual's service within a specified period following the change in control.
The acceleration of vesting upon a change in the ownership or control of
the Company 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.
Financial Assistance
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options or the purchase of
shares under the Discretionary Option Grant and Stock Issuance Programs. The
Plan Administrator will have complete discretion to determine the terms of any
such financial assistance. However, the maximum amount of financing provided any
individual may not exceed the cash consideration payable for the issued shares
plus all applicable taxes. Any such financing may be subject to forgiveness in
whole or in part, at the discretion of the Plan Administrator, over the
participant's period of service.
Special Tax Election
The Plan Administrator may provide one or more holders of options or
unvested shares (other than the options granted or the shares issued under the
Automatic Option Grant Program) with the right to have the Company withhold a
portion of the shares otherwise issuable to such individuals in satisfaction of
the tax liability incurred by such individuals in connection with the exercise
of those options or the vesting of those shares. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such tax liability.
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<PAGE> 16
Stock Awards
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the 1996 Plan between January 1, 1997 and March 31, 1998, together with the
weighted average exercise price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
OPTIONS GRANTED
(NUMBER OF WEIGHTED AVERAGE
NAME SHARES) EXERCISE PRICE
---- --------------- ----------------
<S> <C> <C>
John W. Hall................................................ 140,000 $7.65
President, Chief Executive Officer and Director
Don P. Duffy................................................ 70,000 $7.52
Executive Vice President and Chief Financial Officer
Frank Marraccino............................................ 65,000 $7.48
Executive Vice President
David Mac Innis............................................. 5,000 $8.00
Senior Vice President
Eugene J. Warner............................................ 10,000 $7.25
Executive Vice President
All current executive officers as a group (5 persons)....... 290,000 $7.57
Thomas C. Stickel........................................... 10,000 $8.00
Chairman of the Board
Bruce R. Hallett............................................ 2,000 $8.50
Secretary and Director
Robert A. Hoff.............................................. -- --
Director
G. Bradford Jones........................................... -- --
Director
All non-employee directors as a group (4 persons)........... 12,000 $8.08
All employees, including current officers who are not
executive officers, as a group (392 persons).............. 292,700 $7.77
</TABLE>
As of March 31, 1998, options covering 969,787 shares of Common Stock were
outstanding under the 1996 Plan, 208,666 shares remained available for future
option grant assuming stockholder approval of the 200,000-share increase which
forms part of this Proposal, and 154,851 shares have been issued under the 1996
Plan in connection with option exercises.
Amendment and Termination
The Board may amend or modify the 1996 Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law or
regulation. The Board may terminate the 1996 Plan at any time, and the 1996 Plan
will in all events terminate on February 27, 2006.
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the 1996 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive 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. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a
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<PAGE> 17
taxable disposition. For Federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. A qualifying disposition
occurs if the sale or other disposition is made after the optionee has held the
shares for more than two (2) years after the option grant date and more than one
(1) year after the exercise date. If either of these two (2) holding periods is
not satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, 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 the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be recognized as a capital gain or loss by the optionee.
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 option exercise date 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.
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.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then 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 (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. 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 option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) 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 an income tax 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.
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 an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.
Direct Stock Issuance
The tax principles applicable to direct stock issuances under the 1996 Plan
will be substantially the same as those summarized above for the exercise of
non-statutory option grants.
Deductibility of Executive Compensation
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options will qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will not
have to be taken into
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<PAGE> 18
account for purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of the
Company. Accordingly, all compensation deemed paid with respect to those options
will remain deductible by the Company without limitation under Internal Revenue
Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less than
the fair market value of the shares at the time of grant or issuance will result
in a charge to the Company's earnings for financial reporting purposes, but
option grants or stock issuances with exercise or issue prices equal to the fair
market value of the shares at the time of issuance or grant will not result in
any charge to the Company's earnings. However, whether or not the option grants
result in a charge to earnings, the Company must disclose in the notes to the
Company's financial statements the fair value of options granted under the 1996
Plan and the pro forma impact on the Company's annual net income and earnings
per share as though the computed fair value of such options had been treated as
compensation expense. In addition, the number of outstanding options may be a
factor in determining the Company's earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
NEW PLAN BENEFITS
As of March 31, 1998, no options had been granted to date on the basis of
the 200,000-share increase to the 1996 Plan which forms part of this Proposal.
At the Annual Meeting, the four (4) non-employee Board members will each receive
the annual automatic option grant for 2,000 shares.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendments to the 1996 Plan. Should such
stockholder approval not be obtained, then any options granted on the basis of
the 200,000-share increase which forms part of this Proposal will terminate
without becoming exercisable for any of the shares of Common Stock subject to
those options, and no further options will be granted on the basis of such share
increase. In addition, the automatic annual share increase feature will also not
be implemented. The initial and the annual automatic option grants to the
non-employee Board members will not be increased to 10,000 shares and 7,000
shares, respectively, and those grants will continue to vest in accordance with
the vesting schedules currently in effect for them under the Automatic Option
Grant Program. Also, unvested shares issued under the 1996 Plan and subsequently
repurchased by the Company at the option exercise price paid per share will
continue to reduce, on a share-for-share basis, the number of shares available
for issuance under the 1996 Plan. Finally, the non-employee Board members who
are serving as Plan Administrator will not become eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. The 1996 Plan will,
however, continue to remain in effect, and option grants and direct stock
issuances may continue to be made pursuant to the provisions of the 1996 Plan in
effect prior to the amendments summarized in this Proposal, until the available
reserve of Common Stock as last approved by the stockholders has been issued
pursuant to option grants made under the 1996 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENTS TO THE 1996 PLAN.
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<PAGE> 19
PROPOSAL 3
RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS
The Company's Board of Directors has selected Coopers & Lybrand L.L.P. as
the Company's independent accountants for the fiscal year ending December 31,
1998. Although the appointment of Coopers & Lybrand L.L.P. is not required to be
submitted to a vote of the stockholders, the Board of Directors believes it
appropriate as a matter of policy to request that the stockholders ratify the
appointment for the current fiscal year. In the event a majority of the votes
cast at the meeting are not voted in favor of the appointment, the Board of
Directors will reconsider its selection. Proxies solicited by the Board of
Directors will be voted in favor of the appointment unless stockholders specify
otherwise in such proxies.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting with the opportunity to make a statement if the
representative so desires and to respond to appropriate questions.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock voting at
the Annual Meeting is required to ratify the selection of Coopers & Lybrand
L.L.P. as independent accountants. THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" PROPOSAL 3.
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<PAGE> 20
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
March 31, 1998, by: (i) each person (or group of affiliated persons) who is
known by the Company to own beneficially 5% or more of any class of the
Company's Securities; (ii) each of the Company's directors; (iii) the Company's
Chief Executive Officer and each of the Named Executive Officers; and (iv) the
Company's directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED OFFERING(1)
--------------------
NAME AND ADDRESS(2) NUMBER PERCENT
------------------- ------ -------
<S> <C> <C>
Robert A. Hoff(3)........................................... 752,113 12.5%
G. Bradford Jones(4)........................................ 647,569 10.7%
The Bass Group(12).......................................... 618,200 10.3%
Wellington Management Company, LLP(13)...................... 564,400 9.4%
John W. Hall(5)............................................. 361,556 6.0%
BayView Capital Corporation(14)............................. 330,530 5.5%
Regan E. Kelly(6)........................................... 112,517 2.0%
Don P. Duffy(7)............................................. 38,248 *
Frank Marraccino(8)......................................... 35,476 *
Bruce R. Hallett(9)......................................... 16,123 *
Thomas C. Stickel(10)....................................... 46,016 *
All executive officers and directors
as a group (10 persons)(11)............................... 2,007,618 33.3%
</TABLE>
- ---------------
* Less than one percent.
(1) Percentage of ownership is based on 6,026,563 shares of Common Stock
outstanding as of March 31, 1998.
(2) Unless otherwise indicated, the persons named in the table have sole voting
and sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
(3) Includes, as of March 31, 1998: 8,000 shares of Common Stock issuable upon
the exercise of immediately exercisable shares by Mr. Hoff. Mr. Hoff, as a
general partner of Crosspoint Venture Partners since 1993, 18552 MacArthur
Boulevard, Suite 400, Irvine, California 92714 may be deemed to share
voting and dispositive power with respect to these shares. Mr. Hoff
disclaims beneficial ownership of these shares except for his proportional
interest therein.
(4) Includes, as of March 31, 1998: 8,000 shares of Common Stock issuable upon
the exercise of immediately exercisable shares by Mr. Jones. Mr. Jones, as
a general partner of Brentwood Associates VI, L.P., 2730 Sand Hill Road,
suite 250, Menlo Park, California 94025 may be deemed to share voting and
dispositive power with respect to these shares. Mr. Jones disclaims
beneficial ownership of these shares except for his proportional interest
therein.
(5) Includes, as of March 31, 1998: 110,106 shares of Common Stock issuable
upon the exercise of immediately exercisable options, none of which would
be subject to repurchase by the Company. Mr. Hall is President and CEO of
Onyx Acceptance Corporation, 8001 Irvine Center Drive, 5th Floor, Irvine,
Ca. 92618.
(6) Includes, as of March 31, 1998: (i) 6,561 shares of Common Stock issuable
upon the exercise of immediately exercisable options.
(7) Includes, as of March 31, 1998: (i) 38,148 shares of Common Stock issuable
upon the exercise of immediately exercisable options, of which 1,093 shares
of Common Stock would be subject to repurchase by the Company under certain
circumstances.
(8) Includes, as of March 31, 1998, 18,436 shares of Common Stock, issuable
upon the exercise of immediately exercisable options.
(9) Includes, as of March 31, 1998, 16,123 shares of Common Stock issuable upon
the exercise of immediately exercisable options, some of which may be
subject to repurchase by the Company under certain circumstances.
(10) Includes, as of March 31, 1998, 46,016 shares of Common Stock issuable upon
the exercise of immediately exercisable options, some of which may be
subject to repurchase by the Company under certain circumstances.
(11) Includes, as of March 31, 1998, (i) 752,113 shares of Common Stock held by
Crosspoint Venture Partners 1993, and/or Crosspoint Venture Partners
Entrepreneurs 1993, (ii) 639,569 shares of Common Stock held by Brentwood
18
<PAGE> 21
Associates VI, L.P., and (iii) an aggregate of 244,810 shares issuable to
the Company's executive officers and directors upon the exercise of
immediately exercisable option some of which may be subject to repurchase
by the Company under certain circumstances, and (v) does not include shares
owned by the Bass Group, Wellington Management Company, or BayView Capital
Corporation.
(12) The Bass Group as used herein consists of The Bass Management Trust
(154,550 shares; 2.6%), Perry R. Bass (154,550 shares; 2.6%), Nancy L. Bass
(0 shares; 0.0%), Sid R. Bass Management Trust (154,550 shares; 2.6%), Sid
R. Bass (154,550 shares; 2.6%), Lee M. Bass (154,550 shares; 2.6%), Edward
P. Bass (154,550 shares; 2.6%). The above persons are collectively referred
to as the "Reporting Persons" pursuant to Amendment No. 2 to Schedule 13D
Statement filed November 10, 1997 and made a single, joint filing because
they may be deemed to constitute a "group" within the meaning of Section
13(d)(3) of the Act, although neither the fact of that filing nor anything
therein should be deemed to be an admission by the Reporting Persons that a
group exists.
(13) Wellington Management Company, LLP ("WMC"), 75 State Street, Boston,
Massachusetts 02109 in its capacity as investment advisor, may be deemed to
beneficially own 564,400 shares of Onyx which are held of record by clients
at WMC.
(14) Bay View Capital Corporation, 1840 Gateway Drive, San Mateo, CA 94404 has
acquired 330,530 shares of Onyx Common Stock. 150,000 shares were purchased
on the open market and 180,530 shares are purchasable pursuant to a Common
Stock Purchase Warrant.
STOCK PRICE PERFORMANCE GRAPH (2)
Set forth below is a line graph depicting the quarterly percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the NASDAQ composite and a compiled peer group
for the period commencing December 31, 1996, and ending December 31, 1997.
The following graph compares the value of a $100 investment made on
12/31/96 in each of Onyx, Onyx Peer Group, and the NASDAQ Composite Index as of
3/31/97, 6/30/97, 9/30/97 and 12/31/97.
<TABLE>
<CAPTION>
Measurement Period Onyx Acceptance
(Fiscal Year Covered) Corp. Peer Group Nasdaq Composite
--------------------- --------------- ---------- ----------------
<S> <C> <C> <C>
12/31/96 100 100 100
3/31/97 94.12 79.19 94.63
6/30/97 89.76 85.68 111.7
9/30/97 88.24 100.14 130.57
12/31/97 91.28 60.28 121.64
</TABLE>
(1) Companies in peer group are WFS Financial, Inc., Union Acceptance
Corporation and Arcadia Financial Corporation.
(2) This section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference into any filing of the Company
under the Securities Act or the Exchange Act whether made before or after
the date hereof and irrespective of any general incorporation language in
such filing.
19
<PAGE> 22
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more then ten percent of the Company's
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of the Common Stock of the
Company. To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, the Company believes that all of its officers and
directors and greater than ten percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them with respect to
transactions during the fiscal year ended December 31, 1997.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder intending to submit to the Company a proposal for inclusion
in the Company's Proxy Statement and proxy for the 1999 Annual Meeting must
submit such proposal so that it is received by the Company no later than January
2, 1999. Stockholder proposals should be submitted to the Secretary of the
Company. No stockholder proposals were received for inclusion in this proxy
statement.
Pursuant to the Company Bylaws, no business proposal will be considered
properly brought before the next annual meeting by a stockholder, and no
nomination for the election of directors will be considered properly made at the
next annual meeting by a stockholder, unless notice thereof, which contains
certain information required by the Bylaws, is provided to the Company no later
than 90 days prior to the next annual meeting.
OTHER MATTERS
While the Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented for action by
the stockholders other than as set forth above. The enclosed proxy gives
discretionary authority to the Board of Directors, however, to consider and vote
on any additional matters that may be presented.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report on Form 10-K for the year ended December 31,
1997 is being mailed to stockholders together with this Proxy Statement.
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Regan E. Kelly
Assistant Secretary
Irvine, California
April 17, 1998
20
<PAGE> 23
ONYX ACCEPTANCE CORPORATION
1996 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(AS AMENDED AND RESTATED APRIL 23, 1998)
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to promote
the interests of Onyx Acceptance Corporation, a Delaware 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 three 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,
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase
of such shares or as a bonus for services rendered the Corporation (or
any Parent or Subsidiary), and
(iii) 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 Five shall apply to all
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
<PAGE> 24
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs 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
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed 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.
C. Each 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 and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
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 or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.
D. 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 or stock issuances under the
Plan.
E. 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 and Stock Issuance Programs are as follows:
2.
<PAGE> 25
(i) Employees,
(ii) non-employee members of the Board 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. Each 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, (i) 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 Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid for such shares.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.
D. The individuals eligible to participate in the Automatic
Option Grant Program shall be limited to those individuals who are serving as
non-employee Board members on the Automatic Option Grant Program Effective Date
and those individuals who first become non-employee Board members after such
date, whether through appointment by the Board or election by the Corporation's
stockholders. 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 initial 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 after one or more Annual
Stockholders 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 1,333,304
shares. Such authorized share reserve is comprised of (i) the initial share
reserve of 600,000 shares approved for the Plan prior to the Section 12(g)
Registration Date, (ii) the number of shares which remained available for
issuance, as of the Section 12(g) Registration Date, under the Predecessor Plans
as last approved by the Corporation's stockholders,
3.
<PAGE> 26
including the shares subject to the outstanding options incorporated into the
Plan and any other shares which would have been available for future option
grants under the Predecessor Plans and (iii) an additional increase of 200,000
shares approved by the Board on April 23, 1998, subject to stockholder approval.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 1999 calendar
year, by an amount equal to three percent (3%) of the shares of Common Stock
outstanding on the last trading day of the immediately preceding calendar year.
No Incentive Options may be granted on the basis of the additional shares of
Common Stock resulting from such annual increases.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate over the term of the
Plan.
D. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plans) 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.
Unvested shares issued under the Plan and subsequently cancelled or repurchased
by the Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan (including any option incorporated from the
Predecessor Plans) 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 or the vesting of a stock issuance 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 or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
E. 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 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, separately exercisable stock appreciation rights
and direct stock issuances over the term of the Plan, (iii) the number and/or
class of securities for which automatic option grants are to be made
subsequently 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 (including any option incorporated from the
Predecessor Plans) 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> 27
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 Five 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> 28
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 exercised subsequently 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 the option is not
otherwise at that time exercisable for vested shares.
(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 an Involuntary Termination
following 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:
6.
<PAGE> 29
(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 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. Stockholder Rights. The holder of an option shall have no
stockholder 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-Qualified Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion 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.
7.
<PAGE> 30
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% Stockholder. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred 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.
8.
<PAGE> 31
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. The Plan Administrator shall
also have the discretion to grant options which do not accelerate whether or not
such options are assumed (and to provide for repurchase rights that do not
terminate whether or not such rights are assigned) in connection with a
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 following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year.
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 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 eighteen (18) 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.
9.
<PAGE> 32
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
($100,000) 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 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 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.
10.
<PAGE> 33
(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 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) The Plan Administrator shall pre-approve, at the
time the limited right is granted, the subsequent exercise of that right
in accordance with the terms of the grant and the provisions of this
Section V. No additional approval of the Plan Administrator or the Board
shall be required at the time of the actual 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
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price.
1. The purchase 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 issuance date.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments, and
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<PAGE> 35
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase- money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non- attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All outstanding cancellation rights under the Stock
Issuance Program shall terminate automatically, and all 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/cancellation rights are 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 in the Stock
Issuance Agreement.
13.
<PAGE> 36
B. Any cancellation rights that are assigned in 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 Participant's Service should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective date
of such Corporate Transaction.
C. The Plan Administrator shall have the discretion to provide
for cancellation rights with terms different from those in effect under this
Section II in connection with a Corporate Transaction.
D. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's cancellation right remains outstanding, to (i) provide for the
automatic termination of one or more outstanding cancellation rights and 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 accelerated vesting
upon the subsequent Involuntary Termination of the Participant's Service within
a specified period following the effective date of such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
14.
<PAGE> 37
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member after the 1998 Annual Stockholders Meeting shall
automatically be granted, on the date of such initial election or appointment
(as the case may be), a Non-Statutory Option to purchase 10,000 shares of Common
Stock.
2. On the date of each Annual Stockholders Meeting,
beginning with the 1999 Annual Meeting, each individual who is re-elected to
serve as a non-employee Board member at such meeting shall automatically be
granted a Non-Statutory Option to purchase an additional 7,000 shares of Common
Stock, provided such individual has served as a non-employee Board member for at
least six (6) months. There shall be no limit on the number of such 7,000-share
option grants any one Eligible Director may receive over his or her period of
Board service.
Stockholder approval of this 1998 Restatement at the 1998
Annual Stockholders Meeting will constitute pre-approval of each option
subsequently granted on or after the date of such Annual Meeting pursuant to the
express terms of this Automatic Option Grant Program and the subsequent exercise
of that option in accordance with its terms.
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 initial grant shall vest,
15.
<PAGE> 38
and the Corporation's repurchase right shall lapse, in a series of twenty-four
(24) successive equal monthly installments upon the Optionee's completion of
each month of Board service over the twenty-four (24)-month period measured from
the option grant date. Each annual grant shall vest, and the Corporation's
repurchase right shall lapse, in a series of twelve (12) successive equal
monthly installments upon the Optionee's completion of each month of Board
service over the twenty-four (24)-month period measured from the option grant
date.
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 those
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 for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
16.
<PAGE> 39
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 those 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 those 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 or her at that time. 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. Stockholder approval
of this 1998 Restatement at the 1998 Annual Meeting shall constitute
pre-approval of each option granted with such a surrender right under this
Automatic Option Grant Program on or after the date of that Annual Meeting and
the subsequent exercise of such right in accordance with the terms and
provisions of this Section II.C. No additional approval or consent of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution.
D. 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 the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
17.
<PAGE> 40
E. 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. 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.
18.
<PAGE> 41
ARTICLE FIVE
MISCELLANEOUS
-------------
I. FINANCING
A. The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price for shares issued under the Stock Issuance 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 or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
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 or upon the issuance
or vesting of such shares 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 or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued 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 or the vesting of their shares. 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 or the vesting of such
shares, 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.
19.
<PAGE> 42
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or share
vesting 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 and Stock Issuance Programs
became effective on the Plan Effective Date. The Automatic Option Grant Program
became effective on the Automatic Option Grant Program Effective Date. The Plan
serves as the successor to the Predecessor Plans, and no further option grants
or direct stock issuances shall be made under the Predecessor Plans after the
Section 12(g) Registration Date. All options outstanding under the Predecessor
Plans as of such date were incorporated into the Plan at that time and shall be
treated as outstanding options under the Plan. However, each outstanding option
so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
B. The Plan was amended and restated by the Board, effective
April 23, 1998 (the "April 1998 Restatement") to effect the following revisions:
(i) increase the maximum number of shares of Common Stock authorized for
issuance over the term of the Plan by 200,000 shares, from 1,133,304 shares to
1,333,304 shares, (ii) implement an automatic share increase feature pursuant to
which the number of shares available for issuance over the term of the Plan
shall automatically increase on the first trading day of each calendar year,
beginning with the 1999 calendar year, by an amount equal to three percent (3%)
of the total number of shares of Common Stock outstanding on the last trading
day of the immediately preceding calendar year, (iii) increase the number of
shares subject to the automatic option grants to the non-employee Board members
under the Automatic Option Grant Program from 8,000 shares to 10,000 shares for
the initial automatic grants and from 2,000 shares to 7,000 shares for the
annual automatic grants, (iv) render the non-employee Board members serving on
the Primary Committee eligible to receive option grants under the Discretionary
Option Grant Program and direct stock issuances under the Stock Issuance
Program, (v) allow unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the option exercise or direct issue price paid
per share to be reissued under the Plan, (vi) remove certain restrictions on the
eligibility of non-employee Board members to serve as Plan Administrator and
(vii) effect a series of additional changes to the provisions of the Plan
(including the stockholder approval requirements) in order to take advantage of
the recent amendments to Rule 16b-3 of the Securities and Exchange Commission
which exempts certain officer and director transactions under the Plan from the
short-swing liability provisions of the federal securities laws.
The April 1998 Restatement is subject to stockholder approval at
the 1998 Annual Meeting. Should such stockholder approval not be obtained, then
any options granted on the basis of the 200,000-share increase which forms part
of this Proposal shall terminate without becoming
20.
<PAGE> 43
exercisable for any of the shares of Common Stock subject to those options, and
no further options shall be granted on the basis of such share increase. In
addition, (i) the automatic annual share increase feature shall not be
implemented, (ii) the initial and the annual automatic option grants to the
non-employee Board members shall not be increased to 10,000 shares and 7,000
shares, respectively, and those grants shall continue to vest in accordance with
the vesting schedules currently in effect for them under the Automatic Option
Grant Program, (iii) unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the purchase price paid per share shall
continue to reduce, on a share-for-share basis, the number of shares available
for issuance under the Plan, and (iv) the non-employee Board members who are
serving as on the Primary Committee shall not become eligible to participate in
the Discretionary Option Grant and Stock Issuance Programs. The Plan shall,
however, continue to remain in effect, and option grants and direct stock
issuances may continue to be made pursuant to the provisions of the Plan in
effect prior to the amendment summarized in this Proposal, until the available
reserve of Common Stock as last approved by the stockholders has been issued
pursuant to option grants made under the Plan. All option grants made under the
Plan prior to the April 1998 Restatement shall remain outstanding in accordance
with the terms and conditions of the respective instruments evidencing those
options, and nothing in the April 1998 Restatement shall be deemed to modify or
in any way affect those outstanding options.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plans which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) February 27,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance
of shares (whether vested or unvested) under the Plan or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all outstanding options and unvested stock issuances shall
continue to have force and effect in accordance with the provisions of the
documents evidencing such options or issuances.
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, no such
amendment or modification shall adversely affect any rights and obligations with
respect to options, stock appreciation rights or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant consents
to such amendment or modification. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for
21.
<PAGE> 44
issuance under the Plan, provided any excess shares actually issued under those
programs are held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess grants or 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 and the Participants the exercise or
purchase 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 (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program 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 or the
Participant 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 or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
22.
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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 Underwriting Agreement is executed and the initial public
offering price of the Common Stock is established.
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 stockholders which
the Board does not recommend such stockholders 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
stockholder-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
A-1.
<PAGE> 46
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 Onyx Acceptance Corporation, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Onyx Acceptance Corporation which shall by appropriate
action adopt the Plan.
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.
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
A-2.
<PAGE> 47
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.
O. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through 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 stockholders
which the Board does not recommend such stockholders to accept.
P. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
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 or Participant, 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, Participant 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.
A-3.
<PAGE> 48
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. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
X. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant 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. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member 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.
Y. PLAN shall mean the Corporation's 1996 Stock Option/Stock
Issuance Plan, as set forth in this document.
Z. 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 and Stock Issuance Programs 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.
AA. PLAN EFFECTIVE DATE shall mean February 28, 1996, the date on
which the Plan was adopted by the Board.
BB. PREDECESSOR PLANS shall mean the Corporation's 1994 Stock
Option Plan and the 1994 Special Performance Option Grant Plan.
CC. 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 and Stock Issuance Programs with respect to Section
16 Insiders.
A-4.
<PAGE> 49
DD. 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.
EE. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
FF. 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.
GG. 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.
HH. 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 or stock issuance.
II. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
JJ. STOCK ISSUANCE AGREEMENT shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
KK. STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.
LL. 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.
MM. 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.
NN. 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.
OO. 10% STOCKHOLDER 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).
A-5.
<PAGE> 50
ONYX ACCEPTANCE CORPORATION
PROXY
THIS PROXY IS SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON WEDNESDAY, MAY 20, 1998.
The undersigned hereby appoints G. Bradford Jones and Don P. Duffy as
proxies with full power of substitution, and authorizes them, or any one or
more of them, to vote all shares of Common Stock of Onyx Acceptance Corporation
(the "Company") which the undersigned is entitled to vote at the Company's
Annual Meeting of Stockholders to be held on May 20, 1998, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon the matters specified on
the reverse side of this card and in accordance with the following
instructions, with discretionary authority as to any other matters that may
properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER ON THE REVERSE SIDE. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ON THE
REVERSE SIDE AND FOR PROPOSAL 2 AND, AS TO ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
DISCRETION OF THE PROXIES.
(CONTINUED ON REVERSE SIDE)
<PAGE> 51
PLEASE DATE, SIGN AND MAIL
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ONYX ACCEPTANCE CORPORATION
MAY 20, 1998
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
WITHHOLD
AUTHORITY
to vote for all
FOR nominees listed
1. Election of [ ] [ ] NOMINEES: Thomas C. Stickel
Directors: John W. Hall
2. Ratification of Independent Accountants: Coopers FOR AGAINST ABSTAIN
& Lybrand, L.L.P. [ ] [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED FOR DOMESTIC MAILING.
PLEASE CHECK THIS [ ]
BOX IF YOU PLAN TO
ATTEND THE MEETING.
SIGNATURES:________________________ _________________________ DATE:_______, 1998
Signature if held jointly
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by authorized officer. If a partnership, please sign
in partnership name by authorized person.
