{LOGO}
Don G. Hoff
Chairman and Chief Executive Officer
April 10, 1997
To Our Stockholders
On behalf of the Board of Directors, I cordially invite you to attend the 1997
Annual Meeting of Stockholders of The Lamaur Corporation. The Annual Meeting
will be held on May 9, 1997 at 10:00 a.m., Pacific time, in the conference room
at the Company's headquarters at One Lovell Avenue, Mill Valley, California
94941. The formal Notice of Annual Meeting appears on the next page.
The attached Proxy Statement describes the matters that we expect to act upon at
the Annual Meeting. It is important that your views be represented whether or
not you are able to be present at the Annual Meeting. Please sign and date the
enclosed proxy card and return it in the enclosed postage paid envelope. The
Board of Directors recommends that stockholders vote FOR items 1 through 4 as
listed on the proxy card.
Sincerely,
THE LAMAUR CORPORATION
/s/
Don G. Hoff
Chairman and Chief Executive Officer
The Lamaur Corporation
One Lovell Avenue Mill Valley CA 94941
Telephone 415 380 8200 Facsimile 415 380-8170
<PAGE>
THE LAMAUR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 9, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
Lamaur Corporation (the "Company") will be held on May 9, 1997 at 10:00 a.m.,
Pacific time, at the Company's headquarters at One Lovell Avenue, Mill Valley,
California 94941 for the following purposes:
1. To elect seven directors.
2. To ratify and approve the adoption of the Company's 1997 Stock Plan
(the "Stock Plan"), including the reservation of approximately 239,150 shares of
Common Stock that have been previously reserved but are not issued or subject to
an outstanding option under either the 1996 Stock Incentive Plan or the 1996
Nonstatutory Stock Option Plan and any shares returned to these plans as a
result of termination of options.
3. To ratify and approve the adoption of the Company's 1997 Employee
Stock Purchase Plan (the "Purchase Plan"), including the reservation of 400,000
shares of Common Stock for issuance thereunder.
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 9, 1997
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed proxy as promptly as possible in the postage prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if the stockholder has previously returned a proxy.
By Order of the Board of Directors
John D. Hellmann
Vice President, Chief Financial Officer & Secretary
Mill Valley, California
April 10, 1997
<PAGE>
THE LAMAUR CORPORATION
PROXY STATEMENT FOR 1997
ANNUAL MEETING OF STOCKHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
The Lamaur Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held on May 9, 1997 at 10:00 a.m., Pacific time, or at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the
Company's headquarters at One Lovell Avenue, Mill Valley, California 94941.
The proxy solicitation materials were mailed on or about April 22, 1997
to all stockholders entitled to vote at the meeting.
Record Date and Share Ownership
Stockholders of record at the close of business on April 9, 1997 (the
"Record Date") are entitled to notice of the meeting and to vote at the meeting.
At the Record Date, 5,659,495 shares of the Company's Common Stock were issued
and outstanding and held of record by 394 registered stockholders.
Also, at the Record Date, 1,000,000 shares of Series A Preferred Stock
and 763,500 shares of Series B Preferred Stock were issued and outstanding and
held of record by one stockholder. The Preferred Stock is convertible into an
aggregate of 1,163,910 shares of Common Stock at a rate of 0.66 shares of Common
Stock for each share of Preferred Stock held
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
Voting and Solicitation
Holders of Common Stock are entitled to one vote for each share of
Common Stock held. Holders of Preferred Stock are entitled to one vote for each
share of Common Stock into which such Preferred Stock is convertible. Each share
of Preferred Stock is currently convertible into 0.66 shares of Common Stock.
The Preferred Stock votes with the Common Stock on an as-converted basis on all
matters, except as otherwise required by Delaware law or the Company's
Certificate of Incorporation. Accordingly, based on the number of shares issued
and outstanding at the Record Date, an aggregate of 6,823,405 votes are entitled
to be cast at the Annual Meeting. Stockholders do not have the right to cumulate
their votes in the election of directors.
<PAGE>
This solicitation of proxies is made by the Company, and all related
costs will be borne by the Company. The Company may reimburse brokerage firms
and other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegraph or
personal solicitations by directors, officers or employees of the Company. No
additional compensation will be paid for any such services.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock and Preferred Stock issued and outstanding on the Record Date.
Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are treated
as being present at the meeting for purposes of establishing a quorum and are
also treated as shares entitled to vote at the Annual Meeting (the "Votes Cast")
with respect to such matter.
Although there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In the absence of a controlling precedent to the contrary, the Company intends
to treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes should be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining the
number of Votes Cast with respect to the particular proposal on which the broker
has expressly not voted. Accordingly, the Company intends to treat broker
non-votes in this manner. Thus, a broker non-vote will not have any effect on
the outcome of the voting on a proposal.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1998 Annual Meeting of
Stockholders must be received by the Company no later than December 31, 1997 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership as of December 31, 1996 of the Company's Common Stock as to
(i) each director, (ii) each of the executive officers listed in the Summary
Compensation Table below, (iii) all executive officers and directors as a group
and (iv) each person known by the Company to be the beneficial owner of five
percent or more of the outstanding Common Stock. The percentage owned is
calculated based upon 5,603,395 shares of Common Stock outstanding as of
December 31, 1996. Unless otherwise indicated, each of the stockholders has sole
voting investment power with respect to the shares beneficially owned, subject
to community property laws.
Name of Beneficial Owner Amount and Nature Percentage
of Owned
Beneficial Ownership
Don G. Hoff(1)(2) 1,910,618 32.7%
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Perry D. Hoff(2)(3) 1,700,078 30.3%
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Intertec Holdings, L.P.(2) 1,676,318 30.0%
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DowBrands Inc.(4) 1,163,910 17.2%
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Kennedy Capital Management, Inc.(5) 537,100 9.6%
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Parsow Partnership, Ltd.(6) 444,200 7.9%
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Futurtec, L.P.(7) 419,842 7.5%
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Dominic J. LaRosa(8) 148,500 2.6%
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Gerald A. Eppner(9) 85,800 1.5%
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Joseph F. Stiley, III 64,900 1.2%
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William M. Boswell(10) 26,400 *
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Ronald P. Williams(11) 21,450 *
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Paul E. Dean(12) 16,600 *
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Michele L. Redmon(13) 13,200 *
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Harold M. Copperman(14) 7,600 *
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All executive officers and directors
of the Company as a group (16 persons) (15) 2,510,867 40.8%
- - ----------
*Represents less than one percent.
(1) The address of Don G. Hoff is One Lovell Avenue, Mill Valley, CA
94941. Includes 234,300 shares that may be acquired by Don G. Hoff
upon the exercise of options exercisable within 60 days of December
31,1996. Excludes 96,360 shares held directly by other members of Don
G. Hoff's family as to which he disclaims beneficial ownership. Don G.
Hoff is the father of Perry D. Hoff.
(2) The address of Intertec Holdings, L.P. is East 5058 Grapeview Loop,
Allyn, WA 98524. Consists of 1,676,318 shares held by Intertec
Holdings, L.P., an investment partnership whose general partner is
Intertec Holdings, Inc., a corporation of which Don G. Hoff is a
director, Perry D. Hoff is president and a director and other members
of the Hoffs' immediate family are the remaining officers and
directors and whose sole limited partner is Intertec Ltd., a limited
partnership in which Don G. Hoff holds a 25% limited partner interest
(together with his wife), Perry D. Hoff holds a 25% limited partner
interest and members of the Hoffs' immediate family own the remainder
of limited partnership interest, and whose general partner is a
corporation of which Don G. Hoff is a director, Mr. Perry D. Hoff is
an officer and a director and other members of the Hoffs' immediate
family are the remaining officers and directors. Excludes shares that
Intertec Holdings, L.P. may be required to purchase pursuant to a
stock purchase agreement with the Company.
(3) The address of Perry D. Hoff is East 5058 Grapeview Loop, Allyn, WA
98524. Includes 10,560 shares held directly by Perry D. Hoff and
13,200 shares that may be acquired by Perry D. Hoff upon the exercise
of options exercisable within 60 days of December 31, 1996. Does not
include 85,800 shares held directly by other members of Perry D.
Hoff's family as to which he disclaims beneficial ownership. Perry D.
Hoff is the son of Don G. Hoff.
(4) The address of DowBrands Inc. is 9550 Zionsville Road, P.O. Box 68511,
Indianapolis, IN 46268. Consists of 1,163,910 shares that may be
acquired upon the conversion of Series A and Series B Convertible
Preferred Stock. DowBrands Inc. owns 100% of the outstanding Series A
and Series B Preferred Stock.
(5) The address of Kennedy Capital Management, Inc. is 10829 Olive
Boulevard, St. Louis, MO 63141. It disclaims voting power for 8,400 of
these shares.
(6) The address of Parsow Partnership, Ltd. and Elkhorn Partners Limited
Partnership is P.O. Box 0449, Elkhorn, NE 68022. Parsow and Elkhorn
beneficially own 339,200 and 105,000 of the shares, respectively.
(7) The address of Futurtec, L.P. is 111 Great Neck Road, Suite 301, Great
Neck, NY 11021. Futurtec Capital Corp., the general partner of
Futurtec, L.P., exercises sole voting and investment power over the
shares held by Futurtec, L.P. Mr. Ido Klear is the sole stockholder of
Futurtec Capital Corp.
(8) Includes 82,500 shares that may be acquired upon the exercise of
options and warrants exercisable within 60 days of December 31, 1996.
(9) Includes 13,200 shares that may be acquired upon the exercise of
options exercisable within 60 days of December 31, 1996.
(10) Consists of 26,400 shares that may be acquired upon the exercise of
options and warrants exercisable within 60 days of December 31, 1996.
(11) Consists of 21,450 shares that may be acquired upon the exercise of
options and warrants exercisable within 60 days of December 31, 1996.
(12) Includes 6,600 shares that may be acquired upon the exercise of
options exercisable within 60 days of December 31, 1996.
(13) Consists of 13,200 shares that may be acquired upon the exercise of
options and warrants exercisable within 60 days of December 31, 1996.
(14) Includes 6,600 shares that may be acquired upon the exercise of
options exercisable within 60 days of December 31, 1996.
(15) Includes 542,825 shares that may be acquired upon the exercise of
options and warrants exercisable within 60 days of December 31, 1996.
As of the Record Date, the per share market value of the Company's
Common Stock was $3.25, based on the last reported trade price on that date on
The Nasdaq National Market.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
A board of seven directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's nominees named below. In the event
that any nominee of the Company is unable or declines to serve as a director at
the time of the Annual Meeting of the Stockholders, the proxies will be voted
for any nominee who shall be designated by the present Board of Directors to
fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
of the nominees listed below as possible, and in such event the specific
nominees to be voted for will be determined by the proxy holders. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until a successor has been elected and qualified or
until resignation or removal.
The nominees, and certain information about them as of the Record Date,
are set forth below:
<TABLE>
Director
<CAPTION>
Name of Nominee Age Position(s) Since
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<S> <C> <C>
Don G. Hoff............................ 61 Chairman of the Board and 1993
Chief Executive Officer
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Dominic J. LaRosa...................... 54 President and CEO - Lamaur Division 1995
and Director
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Harold M. Copperman.................... 63 Director 1995
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Paul E. Dean........................... 59 Director 1995
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Gerald A. Eppner....................... 58 Director 1993
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Perry D. Hoff.......................... 38 Director 1993
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Joseph F. Stiley, III.................. 58 Director 1994
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</TABLE>
Don G. Hoff is the founder of the Company and has served as its Chairman
of the Board and Executive Officer since its formation in 1993. Mr. Hoff has
also served as Chairman and Chief Executive Officer of Intertec Ltd., a private
investment company specializing in technology, since 1975. Mr. Hoff serves as a
Director for a number of mutual funds with major financial institutions. He is
currently Chairman of Baring's Asia Pacific Fund and has been a Director of the
fund since 1991. He also serves as a Director of Prudential Short-Term Global
Income Fund (since 1990); Director of Prudential Pacific Growth Fund (since
1991); and Director of Barings Greater China Fund (since 1992). Mr. Hoff spends
the majority of his time on the business of the Company.
Dominic J. LaRosa joined the Company as a director in September 1995,
has been President and CEO of the Lamaur Division since November 1995. From 1993
to 1995, Mr. LaRosa was the founding President and Chief Executive Officer of
J.B. Williams Company, Inc., a personal care products company. From 1982 to
1992, he held senior management positions at Colgate Palmolive/The Mennen
Company, including President and CEO of the Aromatic Industries Division
(1989-1992), General Manager of the Personal Care Division (1987-1989) and Vice
President Marketing (1982-1987). Mr. LaRosa served as Marketing Director of
Bristol-Myers Company, Drackett Products Division from 1979-1982, and held
marketing director and product manager positions at Sterling Drug Company, Lehn
& Fink Division from 1971 to 1979.
Harold M. Copperman has been a Director of the Company since September
1995 and is Chairman of the Compensation Committee and a member of the Audit
Committee and the Nominating Committee. Mr. Copperman is Vice Chairman of
Impulse Telecommunications Corporation, a position he has held since 1990. Prior
to 1990, he held chief executive and senior management positions in strategic
relations, business development, marketing and operations with multinational
organizations as well as start-up entrepreneurial ventures. These include
Electronic Data System Corporation (1987-1990) and Advanced Business
Communications, Inc. (1983-1987). Mr. Copperman's experience in high technology
global business environments also includes senior executive positions with
Northern Telecom Ltd., Stromberg Carlson Corporation and ITT Corporation.
Paul E. Dean has been a Director of the Company since September 1995 and
is a member of the Audit, Compensation and Nominating Committees. Prior to his
retirement in August 1993, Mr. Dean was associated with The Dow Chemical Company
for over 30 years. Immediately prior to retiring and since 1991, Mr. Dean was
the Director of Corporate New Ventures at Dow, responsible for managing new
technology and related business development programs.
Gerald A. Eppner has been a Director of the Company since April 1993 and
is Chairman of the Audit Committee. He has been a partner in the New York law
firm of Battle Fowler LLP, legal counsel to the Company since February 1993,
specializing in domestic and international corporate and securities law matters.
Prior to February 1993, Mr. Eppner was a partner in the New York law firm of
Reid & Priest.
Perry D. Hoff has been a Director of the Company since April 1993 and is
Chairman of the Nominating Committee. He has been the President and a Director
of Intertec Holdings, Inc., since 1990, and a Director and Vice President of
Operations of Innovative Capital Management, Inc., a private investment company,
affiliated with Intertec Holdings, L.P., since 1980. Perry D. Hoff is the son of
Don G. Hoff.
Joseph F. Stiley, III joined the Board in March 1994 and is a member of
the Compensation Committee. Prior to that date and from April 1993, Mr. Stiley
was Vice President of the Company, responsible for research and development.
From December 1987 to 1993, Mr. Stiley was a consultant to high technology
companies, including Intertec Ltd. From 1984 to 1987, Mr. Stiley served as
Executive Vice President of AT&E. From 1977 to 1983, he held key executive
positions with several publicly owned companies, including a strategic business
unit of General Telephone and Electronics and Digital Broadcasting Corporation.
Mr. Stiley has consulted to the governments of Canada and France, other European
and domestic corporations, and has participated in the development of
international standards for communications.
Vote Required
The seven nominees receiving the highest number of affirmative votes of
the Votes Cast 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 legal effect under Delaware law.
Board Meetings and Committees
The Board of Directors of the Company held a total of four meetings
during the fiscal year ended December 31, 1996. The Audit Committee held four
meetings and the Compensation Committee held four meetings during the fiscal
year ended December 31, 1996. Each director attended at least 75% of Board and,
where applicable, committee meetings held during fiscal 1996.
Committees of the Board of Directors
The Audit Committee, established in April 1993, currently consists of
Messrs. Eppner (Chairman), Dean and Copperman. The functions of the Audit
Committee are to recommend annually to the Board of Directors the appointment of
the independent public accountants of the Company, review the scope of their
annual audit and other services they are asked to perform, review the report on
the Company's financial statements following the audit, review the accounting
and financial policies of the Company and review management's procedures and
policies with respect to the Company's internal accounting controls.
The Compensation Committee, also established in April 1993, currently
consists of Messrs. Copperman (Chairman), Dean and Stiley. The functions of the
Compensation Committee are to review and approve salaries, benefits and bonuses
for all executive officers of the Company, and to review and recommend to the
Board of Directors matters relating to employee compensation and employee
benefit plans. The Compensation Committee also administers the Company's stock
option plans.
The Nominating Committee, established in February 1997, currently
consists of Messrs. Perry Hoff (Chairman), Copperman and Dean. The purpose of
the Nominating Committee is to develop criteria for nominating new members of
the Board and to identify potential candidates for such nomination. The
Nominating Committee will consider stockholder recommendations for new
directors. However, the final determination of whether a candidate will be
nominated to become a member of the Company's Board of Directors is reserved for
the Nominating Committee. Any suggestions may be submitted in writing, attention
"Nominating Committee of the Board of Directors," at the Company's headquarters.
Compensation of Directors
During fiscal 1996, each of the non-employee directors was compensated
for participating in Board and committee meetings as follows: For the May and
September 1996 meetings, each director who attended received $500 (plus
reasonable out-of-pocket expenses). Commencing the last quarter of fiscal 1996,
the Company's non-employee Directors are paid $1,000 per quarter (plus
reasonable out-of-pocket expenses), plus $500 per day for each meeting beyond
the four regularly scheduled meetings. In addition, non-employee Directors are
entitled to receive options to purchase shares of Common Stock under the
Company's Outside Director and Advisory Board Plan. See "Stock Option Plan for
Non-Employee Directors and Advisory Board Members."
Battle Fowler LLP, of which Gerald A. Eppner, Esq., a Director of the
Company, is a partner, has represented the Company as general legal counsel
since 1993. During 1996, the Company paid fees to Battle Fowler LLP in the
amount of $676,000, including fees in connection with the Company's initial
public offering.
During 1996 Joseph F. Stiley applied $44,114 in non-cash credits awarded
in 1994 for services rendered to the Company toward the exercise price of
options to purchase 33,000 shares of the Company's Common Stock which had the
effect of reducing the exercise price of these options from $55,143 to $11,029.
PROPOSAL NO. 2
APPROVAL OF THE 1997 STOCK PLAN
On February 25, 1997, the Board of Directors adopted the 1997 Stock
Plan (the "Plan") and reserved (i) any shares that have been previously reserved
but are not issued or subject to an outstanding option under either the
Company's 1996 Stock Incentive Plan ("Incentive Plan") or the 1996 Nonstatutory
Stock Option Plan ("NSO Plan") as of the date of stockholder approval of this
Plan and (ii) any shares returned to the Incentive Plan and the NSO Plan as a
result of termination of options under the Incentive Plan and the NSO Plan. As
of April 10, 1997, the number of shares reserved under the Plan would be 239,150
Shares, however this number may change between April 10, 1997 and May 9, 1997
due to grants and terminations of options under the Incentive Plan and the NSO
Plan during that period.
As of April 10, 1997, no options or stock has been granted pursuant to
the Plan. The Plan is designed to attract and retain personnel by providing such
personnel long term equity participation in the Company relating directly to the
financial performance and long term growth of the Company. A summary of the
material features of the Plan is included below.
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986,
as amended. Section 162(m) limits the Company's deduction in any one fiscal year
for federal income tax purposes to $1,000,000 per person with respect to the
Company's Chief Executive Officer and its four other highest paid executive
officers who are employed on the last day of the fiscal year unless the
compensation was not otherwise subject to the deduction limit. Grants under the
Plan will not be subject to the deduction limitation if the stockholders approve
the Plan including the option grant limitations described below. Therefore, in
order to maximize the Company's federal income tax deductions, the Board of
Directors of the Company is requesting that the stockholders approve the
adoption of the Plan at the Annual Meeting.
The approval of the adoption of the Plan requires the affirmative vote
of the holders of a majority of the Votes Cast.
The Board of Directors recommends that stockholders vote "FOR" the
approval of the Plan.
Summary of the Plan
General. The purpose of the Plan is to attract and retain the best
available personnel for positions of responsibility with the Company, to provide
additional incentive to the employees, directors and consultants of the Company
and to promote the success of the Company's business. Options granted under the
Plan may be either "incentive stock options," as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options. In addition, shares of the Company's Common Stock may be granted under
the Plan.
Administration. The Plan may generally be administered by the Board or a
committee appointed by the Board (the "Administrator"). Subject to the other
provisions of the Plan, the Board has the authority to (i) interpret the Plan
and apply its provisions; (ii) prescribe, amend or rescind rules and regulations
relating to the Plan; (iii) select the persons to whom options are to be
granted; (iv) determine the number of shares to be made subject to each option;
(v) reduce the exercise price of any option to the then current fair market
value; (vi) prescribe the terms and conditions of each option (including the
exercise price, whether an option will be classified as an incentive stock
option or a nonstatutory stock option and the provisions of the stock option
agreement to be entered into between the Company and the grantee); (vii) amend
any outstanding option subject to applicable legal and Plan restrictions; (viii)
authorize any person to execute, on behalf of the Company, any instrument
required to effect the grant of an option; (ix) allow optionees to satisfy their
tax withholding obligation with shares from the option exercise; and (x) take
any other actions deemed necessary or advisable for the administration of the
Plan. All decisions, interpretations and other actions of the Administrator
shall be final and binding on all holders of options and on all persons deriving
their rights therefrom.
Eligibility; Limitations. Nonstatutory stock options and shares of the
Company's Common Stock may be granted under the Plan to employees, consultants
and directors of the Company and any parent or subsidiary of the Company.
Incentive stock options may be granted only to employees. Any optionee who owns
more than 10% of the combined voting power of all classes of outstanding stock
of the Company is not eligible for the grant of an incentive stock option unless
the exercise price of the option is at least 110% of the fair market value of
the Common Stock on the date of grant and the term of the option is no longer
than five years.
Section 162(m) of the Code places limits on the deductibility for
federal income tax purposes of compensation paid to certain executive officers
of the Company. In order to preserve the Company's ability to deduct the
compensation income associated with options granted to such persons, the Plan
provides that no employee may be granted, in any fiscal year of the Company,
options to purchase more than 500,000 shares of Common Stock. Notwithstanding
this limit, however, in connection with an employee's initial employment, he or
she may be granted options to purchase up to an additional 500,000 shares of
Common Stock.
Terms and Conditions of Options. Each option granted under the Plan is
evidenced by a written stock option agreement between the Company and the
optionee, and is subject to the following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, the exercise price
of an incentive stock option granted to a 10% stockholder may not be less than
110% of the fair market value of the Common Stock on the date such option is
granted. The fair market value of the Common Stock is generally determined with
reference to the last reported trade price for the Common Stock on the day the
option is granted. The exercise price of a nonstatutory stock option may be
determined by the Administrator; provided, however, the exercise price of a
nonstatutory stock option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code may not be less
than 100% of the fair market value of the Common Stock on the date of grant.
(b) Exercise of Option. The Administrator determines when options become
exercisable, and may in its discretion, accelerate the vesting of any
outstanding option.
(c) Form of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The Plan permits
payment to be made by cash, check, promissory note, other shares of Common Stock
of the Company (with some restrictions), cashless exercise, a reduction in the
amount of any Company liability to the optionee, any other form of consideration
permitted by applicable law, or any combination thereof.
(d) Term of Option. The term of an incentive stock option may be no more
than ten years from the date of grant; provided that in the case of an incentive
stock option granted to a 10% stockholder, the term of the option may be no more
than five years from the date of grant. No option may be exercised after the
expiration of its term.
(e) Termination of Employment. If an optionee's employment, consulting
or director relationship terminates for any reason (other than death or
disability), then all options held by the optionee under the Plan expire on the
earlier of (i) the date set forth in his or her notice of grant which generally
will be three months from termination of the relationship or (ii) the expiration
date of such option which generally will be ten years from the date of grant. To
the extent the option is exercisable at the time of such termination, the
optionee may exercise all or part of his or her option at any time before
termination.
(f) Permanent Disability; Death. If an optionee's employment, consulting
or director relationship terminates as a result of permanent and total
disability (as defined in the Code) or death, then all options held by such
optionee under the Plan will expire on the earlier of (i) twelve months from the
date of termination of the optionee's employment or (ii) the expiration date of
the option. The optionee or, if applicable, the executor or other legal
representative of the optionee's estate may exercise all or part of the
optionee's option at any time before such expiration to the extent that such
option was exercisable at the time of termination of employment.
(g) Nontransferability of Options. Options granted under the Plan
generally are not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by the
optionee. However, the Administrator may, in its discretion, provide for the
transfer of options to any member of the optionee's immediate family or to
certain trusts and partnerships. Following such transfer, any such options will
continue to be subject to the same terms and conditions as were applicable
immediately prior to the transfer.
(h) Value Limitation. If the aggregate fair market value of all shares
of Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000, the
excess options will be treated as nonstatutory stock options.
(i) Other Provisions. The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
Other Common Stock Programs. The Administrator may adopt one or more
incentive compensation arrangements for employees, consultants and directors.
Such arrangements will allow employees, consultants and directors to acquire
shares of Common Stock, whether by purchase, outright grant or otherwise. Any
such arrangements will be subject to the general provisions of the Plan.
Adjustments Upon Changes in Capitalization. In the event that the stock
of the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments will be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option outstanding under the Plan, and the exercise price of any such
outstanding option.
In the event of a liquidation or dissolution, any unexercised options
will terminate. The Administrator may, in its discretion, provide that each
optionee will have the right to exercise all of the optionee's options,
including those not otherwise exercisable, until the date ten (10) days prior to
the consummation of the liquidation or dissolution.
In connection with any change of control of the Company, the optionee
will have the right to exercise the option as to all the optioned stock,
including shares not otherwise exercisable. In such event, the Administrator
will notify the optionee that the option is fully exercisable within fifteen
days of the change of control. For purposes of the Plan, a change of control of
the Company means the occurrence of any of the following events: (i) any person
is or becomes the owner directly or indirectly of securities representing 25% or
more of the total voting power (other than a person who owns 25% of such total
voting power as of February 25, 1997 or other than any person who acquires 25%
or more of such total voting power with the approval of the Board), or (ii) a
change in the composition of the Board as a result of which fewer than a
majority of the directors are incumbent directors.
In connection with any merger, or acquisition of assets involving the
Company, each outstanding option shall be assumed or an equivalent option
substituted by the successor corporation. If the successor corporation refuses
to assume the options or to substitute substantially equivalent options, the
optionee shall have the right to exercise the option as to all the optioned
stock, including shares not otherwise vested or exercisable. In such event, the
Administrator shall notify the optionee that the option is fully vested and
exercisable for fifteen days from the date of such notice and that the option
terminates upon expiration of such period.
Amendment and Termination of the Plan. The Board may amend, alter,
suspend or terminate the Plan, or any part thereof, at any time and for any
reason. However, the Company will obtain stockholder approval for any amendment
to the Plan to the extent necessary to comply with Section 162(m) and Section
422 of the Code, or any similar rule or statute. No such action by the Board or
stockholders may alter or impair any option previously granted under the Plan
without the written consent of the optionee. Unless terminated earlier, the Plan
will terminate ten years from the date of its approval by the Board.
Federal Income Tax Consequences
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% stockholder of the Company. The Company is entitled to a deduction in the
same amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
The foregoing is only a summary of the effect of federal income taxation
upon optionees and the Company with respect to the grant and exercise of options
under the Plan. It does not purport to be complete, and does not discuss the tax
consequences of the employee's or consultant's death or the provisions of the
income tax laws of any municipality, state or foreign country in which the
employee or consultant may reside.
PROPOSAL NO. 3
APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
On December 4, 1996, the Board of Directors adopted the 1997 Employee
Stock Purchase Plan (the "Purchase Plan") and reserved 400,000 shares of Common
Stock for issuance thereunder subject to stockholder approval. As of April 10,
1997, no options had been granted pursuant to the Plan.
The approval of the adoption of the Purchase Plan requires the
affirmative vote of the holders of a majority of the Votes Cast.
The Board of Directors recommends that stockholders vote "FOR" the
approval of the Purchase Plan.
Summary of the Purchase Plan
General. The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through payroll deductions.
Administration. The Purchase Plan may be administered by the Board of
Directors (the "Board") or a committee appointed by the Board. All questions of
interpretation or application of the Purchase Plan are determined by the Board
or its appointed committee, and its decisions are final, conclusive and binding
upon all participants.
Eligibility. Each employee of the Company (including officers), whose
customary employment with the Company is at least 20 hours per week and more
than five months in any calendar year, is eligible to participate in an Offering
Period (as defined below); provided, however, that no employee shall be granted
an option under the Purchase Plan (i) to the extent that, immediately after the
grant, such employee would own 5% of either the voting power or value of the
stock of the Company, or (ii) to the extent that his or her rights to purchase
stock under all employee stock purchase plans of the Company accrues at a rate
which exceeds $25,000 worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year. Eligible
employees become participants in the Purchase Plan by filing with the Company a
subscription agreement authorizing payroll deductions prior to the beginning of
each Offering Period unless a later time for filing the subscription agreement
has been set by the Board.
Participation in an Offering. The Purchase Plan is implemented by
offering periods lasting for two years (an "Offering Period"), with a new
Offering Period commencing every year. Common Stock may be purchased under the
Purchase Plan every six months (a "Purchase Period"), unless the participant
withdraws or terminates employment earlier. To the extent the fair market value
of the Common Stock on any exercise date in an Offering Period is lower than the
fair market value of the Common Stock on the first day of the Offering Period,
then all participants in such Offering Period will be automatically withdrawn
from such Offering Period immediately after the exercise of their options on
such exercise date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof. The Board may change the duration
of the Purchase Periods or the length or date of commencement of an Offering
Period. To participate in the Purchase Plan, each eligible employee must
authorize payroll deductions pursuant to the Purchase Plan. Such payroll
deductions may not exceed 20% of a participant's compensation. Once an employee
becomes a participant in the Purchase Plan, the employee will automatically
participate in each successive Offering Period until such time as the employee
withdraws from the Purchase Plan or the employee's employment with the Company
terminates. At the beginning of each Offering Period, each participant is
automatically granted options to purchase shares of the Company's Common Stock.
Each option expires at the end of a Purchase Period or upon termination of
employment, whichever is earlier, but is exercised at the end of each Purchase
Period to the extent of the payroll deductions accumulated during such Purchase
Period. In no event shall an employee be permitted to purchase during each
Purchase Period more than 7,500 shares of the Company's Common Stock (subject to
any adjustment pursuant to the terms of the Purchase Plan).
Purchase Price; Shares Purchased. Shares of Common Stock may be
purchased under the Purchase Plan at a price not less than 85% of the lesser of
the fair market value of the Common Stock on (i) the first day of the Offering
Period or (ii) the last day of Purchase Period. For purposes of the Purchase
Plan, the "fair market value" of the Common Stock on any relevant date will be
the closing price per share as reported on The Nasdaq National Market as quoted
on such exchange or reported in The Wall Street Journal. The number of shares of
Common Stock a participant purchases in each Purchase Period is determined by
dividing the total amount of payroll deductions withheld from the participant's
compensation during that Purchase Period by the purchase price.
Termination of Employment. Termination of a participant's employment for
any reason, including disability or death, or the failure of the participant to
remain in the continuous employ of the Company for at least 20 hours per week,
cancels his or her option and participation in the Purchase Plan immediately. In
such event, the payroll deductions credited to the participant's account will be
returned to him or her or, in the case of death, to the person or persons
entitled thereto as provided in the Purchase Plan.
Adjustment Upon Change in Capitalization, Merger or Asset Sale. In the
event that the stock of the Company is changed by reason of any stock split,
reverse stock split, stock dividend, combination, reclassification or other
change in the capital structure of the Company effected without the receipt of
consideration, appropriate proportional adjustments shall be made in the number
and class of shares of stock subject to the Purchase Plan, the number and class
of shares of stock subject to options outstanding under the Purchase Plan, and
the exercise price of any such outstanding options. Any such adjustment shall be
made by the Board, whose determination shall be conclusive. Notwithstanding the
above, in connection with any merger or acquisition of assets involving the
Company, any Offering Periods or Purchase Periods then in progress shall be
shortened to a new exercise date and the Board shall notify each participant
that his or her option shall be exercised automatically on the new exercise
date, unless prior to such date the participant has withdrawn from the Offering
Period.
Amendment and Termination of the Purchase Plan. The Board of Directors may
at any time terminate or amend the Purchase Plan. An Offering Period may be
terminated by the Board of Directors at the end of any Purchase Period if the
Board determines that termination of the Purchase Plan is in the best interests
of the Company and its shareholders. No amendment shall be effective unless it
is approved by the holders of a majority of the votes cast at a duly held
stocklders' meeting, if such amendment would require stockholder approval in
order to comply with Section 423 of the Code. Unless earlier terminated, the
Purchase Plan will terminate in 2006.
Withdrawal. Generally, a participant may withdraw from an Offering
Period at any time without affecting his or her eligibility to participate in
future Offering Periods. However, once a participant withdraws from a particular
offering, that participant may not participate again in the same offering.
Federal Tax Information for Purchase Plan. The Purchase Plan, and the
right of participants to make purchases thereunder, is intended to qualify under
the provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the
Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition
of the shares, the participant will generally be subject to tax and the amount
of the tax will depend upon the holding period. If the shares are sold or
otherwise disposed of more than two years from the first day of the Offering
Period or more than one year from the date of transfer of the stock to the
participant, then the participant will recognize ordinary income measured as the
lesser of (i) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price, or (ii) an amount equal to 15%
of the fair market value of the shares as of the first day of the Offering
Period. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of this holding
period, the participant will recognize ordinary income generally measured as the
excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company is not entitled to a deduction for amounts taxed
as ordinary income or capital gain to a participant except to the extent of
ordinary income is recognized by participants upon a sale or disposition of
shares prior to the expiration of the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has nominated Deloitte & Touche LLP to audit the
consolidated financial statements of the Company for the fiscal year ending
December 31, 1997. Such nomination is being presented to the stockholders for
ratification at the meeting. A representative of Deloitte & Touche LLP is
expected to be present at the meeting and will have the opportunity to make a
statement and be available to respond to appropriate questions.
The ratification of the appointment of the auditors requires the
affirmative vote of the holders of a majority of the Votes Cast. If the
stockholders reject the nomination, the Board will reconsider its selection.
The Board of Directors recommends that stockholders vote "FOR"
ratification of the selection of Deloitte & Touche LLP as the Company's
auditors.
ADDITIONAL INFORMATION RELATING TO
DIRECTORS AND OFFICERS OF THE COMPANY
Certain Transactions
License Agreement. In May 1993, the Company acquired from Intertec Ltd.,
a Delaware limited partnership ("Intertec Ltd."), for a 30-year period, the
exclusive worldwide rights to use all technology owned by Intertec Ltd. relating
to cosmetic hair care applications. The 30-year exclusive license agreement (the
"License") gives the Company the right to develop, manufacture and sell products
for cosmetic hair care applications based on the technology. Intertec Ltd.,
which is entirely owned by Mr. Don G. Hoff and members of his immediate family,
is the sole limited partner in Intertec Holdings, L.P., the Company's principal
shareholder. The License is non-assignable, but the Company may sublicense the
rights granted to it provided the sublicense includes certain protective
provisions. The Company issued, as consideration for the grant of the license, a
promissory note in the principal amount of $1.0 million, and agreed to pay a
royalty as described below. The Company's promissory note, as amended effective
as of May 1993 (the "Intertec Note"), is payable to Intertec Holdings, L.P., as
agent for Intertec Ltd., in four equal annual installments of $250,000,
commencing May 29, 1997. The Intertec Note accrues interest in arrears at 5.5%
per annum, payable with each installment of principal. The Company has also
agreed to pay certain legal expenses, which have been incurred by Intertec Ltd.
in connection with preparing and prosecuting the patent application for the
patent covering the technology. The Company paid less than $60,000 of such
expense during fiscal 1996.
The Company will pay a royalty to Intertec Ltd. equal to (i) 1.0% of the
Company's proceeds from any direct sales made by the Company of products,
instruments or components using, or derived from, the technology, and (ii) 1.0%
of the "revenue base" of the Company's sub-licensees. The "revenue base" is the
proceeds received by the sub-licensees for their sales of products using the
technology. This royalty declines in steps as the revenue base increases,
ultimately declining to 0.4% when cumulative sales from all products using the
technology reach $10.0 billion. The Company has no sub-licenses as of the date
of this Prospectus, and there can be no assurance it will enter into any
sub-license on terms favorable to the Company. Upon expiration in 2012 of the
patent held by Intertec Ltd., the Company will be unable to deny competitors
access to technology.
Neither the $1.0 million license fee, the terms of the Intertec Note nor
the terms of the royalty were established by arm's length negotiations or
independent appraisal.
Common Stock Purchase Agreement. In March 1996, the Company and Intertec
Holdings, L.P. entered into a stock purchase agreement pursuant to which
Intertec Holdings, L.P. agreed to purchase from the Company, and the Company
agreed to sell to Intertec Holdings, L.P., shares of Common Stock at $8.00 per
share. The aggregate number of shares of Common Stock which Intertec Holdings,
L.P. is required to purchase is 146,125 shares. Intertec Holdings, L.P. is
obligated, subject to there being no event of default under the Company's loan
agreements and certain other customary conditions, to purchase and pay for the
shares in four equal installments commencing May 29, 1997. The deferred purchase
price under the stock purchase agreement accrues interest from and after the
closing of the Company's initial public offering at 5.5% per annum, payable with
each installment. Intertec Holdings, L.P. may elect to accelerate one or more
purchases under the stock purchase agreement on 30 days prior notice to the
Company. The Company may, at any time or from time to time, terminate Intertec
Holdings, L.P.'s purchase rights with respect to one or more of the
installments, on 10 days prior notice to Intertec Holdings, L.P. The terms of
the stock purchase agreement were not established by arm's length negotiations
or independent appraisal.
Facilities and Equipment. Pursuant to a lease dated June 30, 1993, the
Company leased from Innovative Capital Management Inc. ("ICM"), an affiliate of
Mr. Don G. Hoff and Mr. Perry D. Hoff, Directors of the Company, for a 36-month
term expiring in June 1996, office space in Mill Valley, CA, together with all
of the furniture and office equipment at that location, for a total of $7,513
per month. The space consisted of approximately 4,000 square feet used for
corporate offices with furniture and equipment, including computers, office
machines, desks, conference tables and related items. This lease was extended on
the same terms and conditions from June 30, 1996 to September 30, 1996.
Effective October 1, 1996, the Company entered into a new sublease with
ICM for a 36-month term expiring in September 1999 for office space in Mill
Valley, CA, together with some of the furniture and office equipment at that
location. The space leased was increased to 6,008 square feet. The space is
leased for a rent of $9,012 per month. Under the terms of the Sublease, the
Company is responsible for property taxes, insurance and maintenance. The
fixtures and equipment are leased for $1,774 per month. The terms of the lease
were not established by arms' length negotiations or independent appraisal. The
Company's Board of Directors approved the terms of the new sublease with Messrs.
Don Hoff and Perry Hoff abstaining. The Board of Directors believes that the
Sublease contains terms as least as favorable for the Company as it could obtain
from other third parties.
Total lease payments for the office space to ICM paid in 1996 were
$85,260, and total lease payments for the furniture and equipment were $37,825.
Manufacturing Agreement with DowBrands. In connection with the
acquisition of the Personal Care Division in November 1995, the Company and
DowBrands entered into a two-year agreement (with two additional one-year
extensions at Dow's election) pursuant to which the Company continued to serve
as DowBrands sole supplier of certain household cleaning products, subject to
the Company maintaining competitive pricing and delivery schedules. Pursuant to
the agreement, DowBrands agreed to accept $3.0 million of credits to be applied
towards purchases of finished products in eight equal quarterly installments of
$375,000 commencing February 1996. During 1996, net sales to DowBrands were
$22.1 million.
Legal Fees. Battle Fowler LLP, in which Gerald A. Eppner, Esq., a
Director of the Company is a partner, has represented the Company as general
legal counsel since 1993. The Company paid fees to Battle Fowler LLP during 1996
in the amount of $676,000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that Forms 5 have been
filed for such persons as required, the Company believes that, during the year
ended December 31, 1996, all reporting persons complied with Section 16(a)
filing requirements applicable to them, except as follows: Form 3's were filed
one day late for all of the Company's directors and executive officers following
the Company's initial public offering. The directors and executive officers
involved are as follows: Messrs. Don Hoff, Perry Hoff, Copperman, Stiley, Dean,
Eppner, LaRosa, Hewson, Loda, Hellmann, Porter, Parenty, Boswell, Williams and
Ms. Redmon.
Employment Agreements and Change-in Control Arrangements
In November 1995 the disinterested members of the Board of Directors
approved an Employment Agreement with Don G. Hoff, Chairman and Chief Executive
Officer, originally entered into as of June 1, 1994, and modified as of November
6, 1995, and which took effect immediately following the closing of the Lamaur
acquisition on November 16, 1995. The Employment Agreement provides for Mr.
Hoff's continued employment as Chief Executive Officer of the Company for a term
ending on December 31, 1998 (the "term of employment"), reporting to the
Company's Board of Directors, and devoting so much of his business time to the
affairs of the Company as the Board requires. The Employment Agreement provides
that Mr. Hoff's salary as Chief Executive Officer (which was increased from
$250,000 to $280,000 per annum effective December 30, 1996) may not be decreased
without his consent. In the event Mr. Hoff is unable to perform his duties as
Chief Executive Officer because of a disability, he shall be entitled to his
full base salary for a period of twelve months from the date of disability and
50% of such base salary for twelve additional months. In addition, the
Employment Agreement provides that Mr. Hoff will continue to be nominated for
election as a director of the Company at each annual meeting of stockholders and
be appointed as Chairman of the Board for so long as he serves as the Company's
Chief Executive Officer.
Under the Employment Agreement, Mr. Hoff shall be required during the
term of employment and for one year thereafter not to engage in any activity
competitive with the Company or any of its subsidiaries or affiliates (except
that he may own up to 5% of the voting stock of any publicly held corporation).
Mr. Hoff is also required to assign to the Company all inventions, discoveries,
know-how or other proprietary technology relating to hair care which he
hereafter conceives, reduces to practice or otherwise creates during the term of
employment.
If, prior to the expiration of the term of employment, Mr. Hoff is
discharged by the Company without Cause (which is defined to mean a discharge of
Mr. Hoff for any reason other than conviction of Mr. Hoff of a felony or a
disability or a discharge as the result of a material breach of any other
provision of the Employment Agreement by the Company which Mr. Hoff elects to
treat as a discharge without Cause, as defined in the Employment Agreement,
including but not limited to certain events which would constitute a "change of
control" of the Company, as defined in the Employment Agreement, without Mr.
Hoff's written consent), Mr. Hoff will be entitled to all benefits under the
Employment Agreement as if he had continued to be employed during the full term
of employment. In addition, if there is a discharge without Cause (i) in lieu of
further salary payments under the Employment Agreement, Mr. Hoff will be
entitled to receive within three days after the date of discharge, an amount
equal to the sum of the discounted present value of the base salary to which he
would have been entitled under the Employment Agreement from the date of
discharge through December 31, 1998 (assuming a 5% yearly increase in his base
salary for each remaining calendar year during the term of employment), and (ii)
all options previously granted to Mr. Hoff, to the extent not then vested or
exercisable, shall become immediately vested and exercisable in full.
Stock Plans
The Company maintains the following stock plans under which officers and
directors of the Company receive benefits.
1997 Stock Plan. For a description of the 1997 Stock Plan, see proposal 2.
1997 Employee Stock Purchase Plan. For a description of the 1997 Employee
Stock Purchase Plan, see proposal 3.
Stock Option Plan for Non-Employee Directors and Advisory Board Members
The Stock Option Plan for Non-Employee Directors and Advisory Board
Members(the "Director Plan") provides for the grant of options for the purchase
of up to 150,000 shares of Common Stock of the Company to non-employee directors
of the Company and members of Advisory Boards established by the Company.
Currently, approximately 7 persons are eligible for grants of options under the
Director Plan. No director may be granted options with respect to more than
75,000 shares during the term of this Plan. The Director Plan is administered by
a "Committee" (currently the Compensation Committee) which is composed of at
least two directors of the Company, each of whom is a "disinterested person"
within the meaning of Rule 16b-3. Under the terms of the Plan, each non-employee
director, on commencement of office will receive an option to purchase 6,600
shares of Common Stock upon the date of election. In addition, on the date of
the Company's annual meeting of shareholders, each non-employee director
continuing in office will receive an option to purchase 3,300 shares of Common
Stock. The exercise price per share for all options granted under the Director
Plan will be equal to the market price of the Common Stock as of the date of
grant and may be paid (i) in cash, (ii) by transferring shares to the Company,
or (iii) a combination of the foregoing. Options become exercisable in full
beginning one year after their date of grant and are exercisable only while the
director is serving as a director of the Company or within 180 days after the
Participant ceases to serve as a director of the Company (except that if a
director dies or becomes disabled while he or she is serving as a director of
the Company, the option is exercisable for a period of 12 months from the date
of death or disability). However, upon a change in control of the Company,
options become immediately and fully exercisable. The Director Plan also
authorizes the issuance of options to individuals serving on Advisory Boards
established by the Company on terms substantially similar to those applicable to
directors. As of March 31, 1997, options to purchase an aggregate of 52,800
shares of Common Stock were outstanding and 64,200 shares of Common Stock were
reserved for future issuance under the Director Plan.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board of Directors currently
consists of Harold M. Copperman (Chairman), Paul E. Dean and Joseph F. Stiley,
III. None of these individuals were at any time during fiscal 1996, or at any
other time, an officer or employee of the Company, except as follows: Joseph F.
Stiley was a Vice President of the Company until 1994. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
Compensation Committee Report
The following is the report of the Compensation Committee of the Board
of Directors describing compensation policies and rationales applicable to the
Company's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended December 31, 1996. The information
contained in the performance graphs shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
Compensation Philosophy. The philosophy of the Company's Compensation
Committee regarding executive compensation is to attract and retain highly
talented executives and to motivate them to high levels of performance
recognizing the different impact that various executives have on the achievement
of corporate goals. To achieve these objectives the Company pays executives on a
total compensation approach that includes varying combinations of base salary,
annual bonus dependent on corporate and individual performance, and stock
options. After evaluating management's performance, the Compensation Committee
approves compensation and pay levels. Stock option grants to executive officers
are approved by the Compensation Committee.
Base Salary: Salaries for executive officers are reviewed annually. In
reviewing executive salaries, data from third party industry surveys are
considered. Bonus: The Compensation Committee
determines the level of bonus
compensation for the entire corporate bonus program based upon corporate and
senior management performance. Bonuses within that pool are then allocated.
Stock: The Company believes that stock options granted to key employees,
including executive officers, provide such persons with compensation based on
overall Company performance as reflected by the stock price, create a valuable
retention device through three-year vesting schedules and help align employees'
and stockholders' interests. Stock options are typically granted at the time of
hire, at the time of promotion or at the time of achievement of a significant
corporate objective. Individual stock option award levels are determined
primarily by a matrix that allocates the available shares based on position
within the Company, with discretionary adjustments based on subjective
performance factors.
Compensation of Chief Executive Officer. The compensation of Don G.
Hoff in fiscal 1996 was approved by the Compensation Committee. The Compensation
Committee determined the Chief Executive Officer's compensation after
considering the same factors used to determine the compensation of other
executive officers.
Fiscal Year 1996 Repricing of Options. In August 1996, the Compensation
Committee determined that the purposes of the 1996 Stock Incentive Plan were not
being adequately achieved with respect to those employees holding options that
were exercisable above current market value and that it was essential to the
best interest of the Company and the Company's stockholders that the Company
retain and motivate such employees. The Committee further determined that it
would be in the best interest of the Company and the Company's stockholders to
provide such optionees the opportunity to exchange their above market value
options for options exercisable at current market value. On August 28, 1996,
upon approval by the Compensation Committee, the Company offered all holders of
outstanding options under the 1996 Stock Incentive Plan at exercise prices in
excess of $4.25 per share the opportunity to exchange such options for new stock
options at an exercise price of $4.25 per share, the fair market value of the
Company's stock. Any executive officer and certain others senior employees
accepting this offer were required to give up vesting on the old option and
accept three year vesting from August 28, 1996 for the new option. Both the old
option and the new repriced option had 25% of the shares subject to the option
vested on the date of grant.
The following table sets forth information with respect to the repricing
of those options held by executive officers of the Company at the time of the
repricing.
<TABLE>
<CAPTION>
Ten-Year Option Repricing
Length of
Original
Option Term
Number of Market in Years
Securities Price of Exercise Remaining at
Underlying Stock at Price at New Date of
Name and Principal Date of Options Time of Time of Execise Repricing or
Position Repricing Repriced Repricing Repricing Price Amendment
- - ------------------- ----------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William M. Boswell 8/28/96 39,600 $4.25 $6.06 $4.25 9.13
Vice President,
Sales - Retail
Group of Lamaur
Division
Richard T. Loda 8/28/96 25,000 $4.25 $6.06 $4.25 9.54
Vice President,
Science and
Technology
Michele L. Redmon 8/28/96 19,800 $4.25 $6.06 $4.25 9.13
Vice President,
Marketing - Retail
Group of Lamaur
Division
Ronald P. Williams 8/28/96 19,800 $4.25 $6.06 $4.25 9.13
Executive Vice
President - Lamaur
Division
John G. Hewson(1) 8/28/96 13,200 $4.25 $6.06 $4.25 9.17
Vice President,
Business
Development
Planning and
Administration -
Lamaur Division
Patrick T. 8/28/96 13,200 $4.25 $6.06 $4.25 9.17
Parenty(1)
Vice President,
Sales - Lamaur
Salon Division
- - ------------
</TABLE>
1 Such executive officer subsequently resigned from the Company and these
options expired without being exercised.
Summary. It is the opinion of the Compensation Committee that the
executive compensation policies and programs in effect for the Company's
executive officers provide an appropriate level of total remuneration that
properly aligns the Company's performance and interests of the Company's
stockholders with competitive and equitable executive compensation in a balanced
and reasonable manner.
COMPENSATION COMMITTEE
Harold M. Copperman
Paul E. Dean
Joseph F. Stiley, III
Stock Performance Graph
In accordance with Exchange Act regulations, the following performance
graph compares the cumulative total stockholder return on the Company's Common
Stock to the cumulative total return on the NASDAQ U.S. and a selected group of
peer issuers over the same period. The peer issuers consist of DEP Corporation,
BeautiControl Cosmetics, Inc., DEL Laboratories, Inc. and The Stephan Cp. The
graph assumes the value of the investment in the Company's Common Stock and each
index was $100 at May 23, 1996 (the date of the Company's initial public
offering) and that all dividends were reinvested. The information contained in
the performance graphs shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
The Lamaur Corporation NASDAQ US Peer Group
05/1996 $ 100.00 $ 100.00 $ 100.00
12/1996 $ 51.56 $ 103.75 $ 125.77
Compensation of Executive Officers
SUMMARY COMPENSATION TABLE
The following table sets forth, for the two fiscal years ended December 31,
1996, certain compensation information with respect to the Company's Chief
Executive Officer during fiscal 1996 and each of the four other most highly
compensated executive officers other than the Chief Executive Officer who were
serving as executive officers as of December 31, 1996 (collectively, the "Named
Executive Officers"), based upon salary and bonus earned by such executive
officers and individuals in fiscal 1996.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Awards
------------------------------------------- -------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus(1) Compensation Options/ Compensation
- - --------------------------- ($)(2) (#)(3) ($)(4)
----- -------- -------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Don G. Hoff 1996 $250,000 $195,000 $2,808 - -
Chairman and Chief Executive Officer 1995 31,730 - - - -
Dominic J. LaRosa 1996 200,000 145,000 33,191 100,000 $50,000
President and CEO - Lamaur Division 1995 15,384 - 4,371 132,000 52,750
William M. Boswell 1996 144,371 53,000 12,715 59,600 30,000
Vice President, Sales, Retail Group 1995 11,538 - 4,371 39,600 19,750
of Lamaur Division
Michele L. Redmon 1996 119,165 50,000 4,304 39,800 15,000
Vice President, Marketing, Retail 1995 9,230 - 7,840 19,800 13,875
Group of Lamaur Division
Ronald P. Williams 1996 102,540 36,000 55,935 69,800 15,000
Executive Vice President. - Lamaur 1995 8,402 - 7,796 19,800 16,275
Division
</TABLE>
(1) Includes bonuses earned in the applicable fiscal year a portion of
which were paid in 1997.
(2) Includes (i) payments of relocation expenses in 1996 in the amount of
$31,700 for Mr. LaRosa (including $11,555 cash to assist in the payment
of taxes), $12,139 for Mr. Boswell (including $2,373 cash to assist in
the payment of taxes), $4,161 for Ms. Redmon (including $1,213 cash to
assist in the payment of taxes) and $55,589 for Mr. Williams (including
$17,543 cash to assist in the payment of taxes), (ii) imputed income in
1996 resulting from life insurance premiums in the amount of $2,808 for
Mr. Hoff, $864 for Mr. LaRosa, $576 for Mr. Boswell, $143 for Ms. Redmon
and $346 for Mr. Williams, and (iii) vehicle allowance of $627 paid to
Mr. LaRosa in 1996.
(3) Represents stock options granted in the years shown with exercise
prices equal to fair market value on the date of grant. No SARs were
granted in such years.
(4) Represents non-cash credits that can be used to exercise options.
Option Grants in Last Fiscal Year
The following table sets forth information with respect to stock
options granted to the Named Executive Officers during fiscal year 1996.
<TABLE>
Potential Realized Value at
<CAPTION>
- - ----------------------------------------------------------------------------------------- Assumed Annual Rates of
Stock Price Appreciation
for Option Term (4)
Individual Grants
- - -----------------------------------------------------------------------------------------
Number of % of Total
Securities Options Granted Exercise or
Underlying to Employees Base Price Expiration
Options
Granted(1) in Fiscal Year(3) ($/sh) Date 5% ($) 10%($)
Name
<S> <C> <C> <C> <C> <C> <C>
Don G. Hoff - - - - - -
Dominic J. LaRosa 100,000 9.84% $4.25 8/28/06 267,280 677,320
William M. Boswell 20,000 1.97% $4.25 8/28/06 53,456 135,464
39,600(2) 3.90% $4.25 8/28/06 105,842 268,218
Michele L. Redmon 20,000 1.97% $4.25 8/28/06 53,456 135,464
19,800(2) 1.95% $4.25 8/28/06 52,921 134,109
Ronald P. Williams 20,000 1.97% $4.25 8/28/06 53,456 135,464
19,800(2) 1.95% $4.25 8/28/06 52,921 134,109
30,000 2.95% $4.00 12/04/06 75,468 191,244
</TABLE>
- - ------------------
(1) Options granted generally vest at the rate of 33% on the annual anniversary
of the date of grant for the three years following the date of grant, so
long as the individual is employed by the Company.
(2) Indicates an option granted on August 28, 1996 in connection with the
Company's repricing program. These options vest at the rate of 25% upon
grant and 25% on the annual anniversary of the date of grant for the three
years following the date of grant. These repriced options are shown as
additional option grants even though they involved the cancellation of a
previously granted option.
(3) The Company granted options to purchase 1,016,250 shares of Common Stock to
employees during fiscal year 1996, which includes 205,050 which were
repriced options which involved the cancellation of a previously granted
option.
(4) Potential realizable value is based on the assumption that the price of the
Common Stock appreciates at the annual rate shown, compounded annually,
from the date of grant until the end of the ten-year option term. The
values are calculated in accordance with rules promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price appreciation.
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth certain information regarding options
for the purchase of the Company's Common Stock that were exercised or held by
the Named Executive Officers during fiscal 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Options at Options
Exercise Value December 31, 1996 at December 31,
Name ($) Realized Exercisable/Unexercisable 1996($)(2)
---- --------- ($) 1 ------------------------- Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Don G. Hoff - - 234,300 - $585,636 -
Dominic J. LaRosa - - 66,000 166,000 72,270 $72,270
William M. Boswell - - 9,900 49,700 - -
Michele L. Redmon - - 4,950 34,850 - -
Ronald P. Willaims - - 4,950 64,850 - -
- - ----------
</TABLE>
(1) Difference between the fair market value of the Common Stock purchased and
the exercise price on the date of exercise. (2) Difference between the fair
market value of the underlying Common Stock and the exercise price, for
in-the-money options, on December 31, 1996.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Company may recommend.
The Company will provide without charge to each person solicited upon
the written request of any such person, a copy of the Company's Annual Report on
Form 10-K, including the financial statements and the financial statement
schedules, for the fiscal year ended December 31, 1996. Requests should be
directed to The Lamaur Corporation, Corporate Secretary, One Lovell Avenue, Mill
Valley, California 94941. Each request must set forth a good faith
representation that, as of April 9, 1997, the person making the request was a
beneficial owner of securities entitled to vote. The Annual Report on Form 10-K
will be provided without exhibits, but will be accompanied by a list of
exhibits. The Company will furnish any exhibit upon the payment of a specified
reasonable fee which fee will be limited to the Company's reasonable expenses in
furnishing such exhibit.
By Order of the Board of Directors
John D. Hellmann,
Vice President, Chief Financial Officer & Secretary
Mill Valley, California
April 10, 1997
<PAGE>
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- - --------------------------------------------------------------------------------
THE LAMAUR CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder(s) of The Lamaur Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 10, 1997, and hereby appoints
Don G. Hoff and John D. Hellmann, and each of them, Proxies and
Attorneys-in-Fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual Meeting
of Stockholders of the Company, to be held on May 9, 1997, at 10:00 a.m., local
time, at the Company's headquarters at One Lovell Avenue, Mill Valley,
California 94941, and at any adjournments thereof, and to vote all shares of
Common Stock and Preferred Stock which the undersigned is entitled to vote on
the matters set forth below:
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on reverse side)
<PAGE>
<TABLE>
x Please mark your
votes in the box
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4.
1. ELECTION OF DIRECTORS:
<S> <C> <C> <C> <C>
NOMINEES: Don G. Hoff, Dominic J. LaRosa, 2. Proposal to ratify and approve the FOR AGAINST ABSTAIN
Harold M. Copperman, Paul E. Dean, adoption of the Company's 1997 Stock
Gerald A. Eppner, Perry D. Hoff Plan. --------------- ------------ -------------
and Joseph F. Stiley, III
--------------- ------------ -------------
FOR WITHHOLD 3. Proposal to ratify and approve the
adoption of the Company's 1997 Employee --------------- ------------ -------------
Stock Purchase Plan.
--------------- ------------ -------------
4. Proposal to ratify the appointment of
Deloitte & Touche LLP as independent --------------- ------------ -------------
auditors of the Company for the fiscal
year ending December 31, 1997. --------------- ------------ -------------
If you wish to withhold authority to vote for any individual nominee, write that
nominee's name on the line above:
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy should be marked, dated, signed by the stockholder(s) exactly as
Signature: the stockholder's name appears herein and returned promptly in the
enclosed Date envelope. Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as community property, both
should sign.
Signature:
Date
</TABLE>
THE LAMAUR CORPORATION
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Plan are: o to attract and
retain the best available personnel for positions of responsibility, o to
provide additional incentive to Employees, Directors and Consultants, and o to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange
or quotation system on which the Common Stock is listed or quoted and
the applicable laws of any foreign country or jurisdiction where
Options are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means the occurrence of any of the following
events:
(i) Any "person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 25% or more of the total voting power
represented by the Company's then outstanding voting securities (other than any
person who owns in excess of 25% of such total voting power as of the date this
Plan is adopted by the Board or other than any person who acquires 25% or more
of such total voting power with the approval of the Board); or
<PAGE>
(ii) A change in the composition of the Board of Directors of the Company
as a result of which fewer than a majority of the directors are "Incumbent
Directors." "Incumbent Directors" shall mean directors who either (A) are
directors of the Company as of this Plan is adopted by the Board, or (B) are
elected, or nominated for election, to the Board of Directors with the
affirmative votes (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for election
as a director without objection to such nominations) of at least three-quarters
of the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors of the
Company).
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means The Lamaur Corporation, a Delaware corporation.
(i) "Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options,
no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If
reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option. Neither service as a Director nor payment
of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
(n) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; (ii) If the Common
Stock is regularly quoted by a recognized securities dealer but selling prices
are not reported, the Fair Market Value of a Share of Common Stock shall be the
mean between the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option. The Notice of
Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(u) "Option Exchange Program" means a program whereby outstanding Options
are surrendered in exchange for Options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option.
(w) "Optionee" means the holder of an outstanding Option granted under the
Plan.
(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1997 Stock Plan.
(z) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(aa) "Section 16(b)" means Section 16(b) of the Exchange Act.
(bb) "Service Provider" means an Employee, Director or
Consultant.
(cc) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(dd) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is a number of Shares equal to the following: (i) any Shares
which have been reserved but are not issued or subject to an outstanding option
under either the Company's 1996 Stock Incentive Plan ("Incentive Plan") or the
1996 Nonstatutory Stock Option Plan ("NSO Plan") as of the date of stockholder
approval of this Plan and (ii) any Shares returned to the Incentive Plan and the
NSO Plan as a result of termination of options under the Incentive Plan and the
NSO Plan. The Shares may be authorized, but unissued, or reacquired Common
Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan upon exercise
of an Option shall not be returned to the Plan and shall not become available
for future distribution under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Service Providers. (ii)
Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code. (iii) Rule 16b-3. To the extent desirable
to qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3. (iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value; (ii) to select the Service
Providers to whom Options may be granted hereunder; (iii) to determine the
number of shares of Common Stock to be covered by each Option granted hereunder;
(iv) to approve forms of agreement for use under the Plan; (v) to determine the
terms and conditions, not inconsistent with the terms of the Plan, of any Option
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
of the shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine; (vi) to
reduce the exercise price of any Option to the then current Fair Market Value if
the Fair Market Value of the Common Stock covered by such Option shall have
declined since the date the Option was granted; (vii) to institute an Option
Exchange Program; (viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan; (ix) to prescribe, amend and rescind rules
and regulations relating to the Plan, including rules and regulations relating
to subplans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws; (x) to modify or amend each Option (subject to
Section 15(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan; (xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable; (xii) to authorize any
person to execute on behalf of the Company any instrument required to effect the
grant of an Option previously granted by the Administrator; (xiii) to make all
other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final
and binding on all Optionees and any other holders of
Options.
5. Eligibility. Nonstatutory Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any
calendar year (under all plans of the Company and any Parent
or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair
Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor
shall they interfere in any way with the Optionee's right or
the Company's right to terminate such relationship at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares. (ii) In connection with
his or her initial service, a Service Provider may be granted Options to
purchase up to an additional 500,000 Shares which shall not count against the
limit set forth in subsection (i) above. (iii) The foregoing limitations shall
be adjusted proportionately in connection with any change in the Company's
capitalization as described in Section 12. (iv) If an Option is cancelled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 12), the cancelled Option
will be counted against the limits set forth in subsections (i) and (ii) above.
For this purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be
determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option (A) granted to an Employee
who, at the time the Incentive Stock Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant. (B)
granted to any Employee other than an Employee described in paragraph (A)
immediately above, the per Share exercise price shall be no less than 100% of
the Fair Market Value per Share on the date of grant. (ii) In the case of a
Nonstatutory Stock Option, the per Share exercise price shall be determined by
the Administrator. In the case of a Nonstatutory Stock Option intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant. (iii) Notwithstanding the
foregoing, Options may be granted with a per Share exercise price of less than
100% of the Fair Market Value per Share on the date of grant pursuant to a
merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which
the Option may be exercised and shall determine any
conditions which must be satisfied before the Option may be
exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive
Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (A) in
the case of Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised; (v) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan; (vi) a reduction in the amount of any
Company liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement; (vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance of Shares
to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not
be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance
with the Option Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment
may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option
Agreement and the Plan. Shares issued upon exercise of an
Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the Shares are issued (as evidenced
by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such Shares promptly
after the Option is exercised. No adjustment will be made
for a dividend or other right for which the record date is
prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon
the Optionee's death or Disability, the Optionee may
exercise his or her Option within such period of time as is
specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the
Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does
not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability,
the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to
the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement). In the
absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of
time as is specified in the Option Agreement (but in no
event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the
Option by bequest or inheritance, but only to the extent
that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of
death, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the
Option shall immediately revert to the Plan. The Option may
be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of
descent or distribution. If the Option is not so exercised
within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option
previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Non-Transferability of Options. Unless determined otherwise by the
Administrator to the contrary, an Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee. The Administrator may, in the manner
established by the Administrator, provide for the transfer, without payment of
consideration, of an Option by the Optionee to any member of the Optionee's
immediate family or to a trust or partnership whose beneficiaries are members of
the Optionee's immediate family. In such case, the Option shall be exercisable
only by such transferee. Following such transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to the transfer. For purposes of this Section, an Optionee's
"immediate family" shall mean the Optionee's spouse, children and grandchildren.
12. Adjustments Upon Changes in Capitalization, Dissolution, or Change of
Control.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the
number of shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the
price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt
of consideration." Such adjustment shall be made by the
Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of
Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator
shall notify each Optionee as soon as practicable prior to
the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee
to have the right to exercise his or her Option until ten
(10) days prior to such transaction as to all of the
Optioned Stock covered thereby, including Shares as to which
the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase
option applicable to any Shares purchased upon exercise of
an Option shall lapse as to all such Shares, provided the
proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not
been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed
action.
(c) Change of Control. In the event of a Change of Control, (i)
each outstanding Option shall fully vest and be exercisable
as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be vested or
exercisable, and (ii) any Shares issued under the Plan shall
vest. The Administrator shall notify the Optionee in writing
or electronically that the Option shall be fully vested and
exercisable within fifteen (15) days of the Change of
Control.
(d) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that
the successor corporation refuses to assume or substitute
for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which it would not otherwise
be vested or exercisable and any Shares issued under the
Plan shall vest. If an Option becomes fully vested and
exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the
Option shall be fully vested and exercisable for a period of
fifteen days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the
option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger
or sale of assets is not solely common stock of the
successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the
Option, for each Share of Optioned Stock subject to the
Option, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the
per share consideration received by holders of Common Stock
in the merger or sale of assets.
13. Other Common Stock Programs. From time to time during the duration of
the Plan, the Administrator may, in it sole discretion, adopt one or more
incentive compensation arrangements for Service Providers pursuant to which such
Service Providers may acquire shares of Common Stock, whether by purchase,
outright grant or otherwise. Any such arrangements shall be subject to the
general provisions of the Plan and all shares of Common Stock issued pursuant to
such arrangements shall be issued under the Plan if so designated by the
Committee.
14. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall
impair the rights of any Optionee, unless mutually agreed
otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan
prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise
of an Option, the Company may require the person exercising
such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for
investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
THE LAMAUR CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock
Purchase Plan of The Lamaur Corporation:
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company. (b) "Code"
shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean The Lamaur Corporation and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings, but
exclusive of payments for commissions, overtime, shift premium,
incentive compensation, incentive payments, bonuses and other
compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick
leave or other leave of absence approved by the Company. Where the
period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the
employment relationship shall be deemed to have terminated on the 91st
day of such leave.
<PAGE>
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the last market trading day prior to
the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean of the closing bid and asked prices for the Common Stock on the date of
such determination, as reported in The Wall Street Journal or such other source
as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Board.
(k) "Offering Periods" shall mean the periods of approximately twenty-four
(24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 of
each year and terminating on the last Trading Day in the period ending
twenty-four months later. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan. (l) "Plan" shall
mean this 1997 Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period
shall commence on the Enrollment Date and end with the next Exercise
Date. The Board shall have the power to change the duration and number
of Purchase Periods in an Offering Period without shareholder approval
if such change is announced at least five (5) days prior to the
scheduled beginning of the Purchase Period to be affected.
(o) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges and
the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent
that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock of the Company and/or hold
outstanding options to purchase such stock possessing five percent
(5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or
(ii) to the extent that his or her rights to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds $25,000 worth of stock (determined at
the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at
any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 of each year, or on such other date as the Board
shall determine. The Plan shall continue until terminated in accordance with
Section 20 hereof. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's
payroll office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in
Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made for each payroll
period ending in the Offering Period in an amount not exceeding twenty
percent (20%) of the Compensation which he or she receives on each pay
day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments
into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a
change in payroll deduction rate. The Board may, in its discretion,
limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's
receipt of the new subscription agreement unless the Company elects to
process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering
Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time
during a Purchase Period. Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the
beginning of the first Purchase Period which is scheduled to end in
the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if
any, which arise upon the exercise of the option or the disposition of
the Common Stock. At any time, the Company may, but shall not be
obligated to, withhold from the participant's compensation the amount
necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 7,500
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19) on the Enrollment Date, and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the
participant's payroll deductions credited to his or her account shall
be paid to such participant promptly after receipt of notice of
withdrawal and such participant's option for the Offering Period shall
be automatically terminated, and no further payroll deductions for the
purchase of shares shall be made for such Offering Period. If a
participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription
agreement.
(b) A participant's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering
Period from which the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any
reason, he or she shall be deemed to have elected to withdraw from the Plan and
the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be 400,000 shares,
subject to adjustment upon changes in capitalization of the Company as
provided in Section 19 hereof. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised
exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to
an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to
receive any cash from the participant's account under the Plan in the
event of such participant's death prior to exercise of the option. If
a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be
effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan
who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
16. Non-Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of
shares each participant may purchase each Purchase Period (pursuant to
Section 7), as well as the price per share and the number of shares of
Common Stock covered by each option under the Plan which has not yet
been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to
an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Periods shall terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, any Purchase Periods then in
progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on
the New Exercise Date. The New Exercise Date shall be before the date
of the Company's proposed sale or merger. The Board shall notify each
participant in writing, at least ten (10) business days prior to the
New Exercise Date, that the Exercise Date for the participant's option
has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted,
provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the
termination of the Plan is in the best interests of the Company and
its shareholders. Except as provided in Section 19 hereof, no
amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent
necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such
a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change
the Offering Periods, limit the frequency and/or number of changes in
the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated
by a participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish
such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with
the Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the adoption by the
Board of Directors. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
