<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERVU INC.
(Name of Registrant as Specified in its Charter)
INTERVU INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11:
(1) Title of each class of securities to which the transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
INTERVU INC.
------------------------
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
TO THE STOCKHOLDERS OF INTERVU INC.:
Notice is hereby given that the Annual Meeting of the Stockholders of
InterVU Inc. (the "Company" or "InterVU"), will be held at the The Michelangelo,
152 West 51st Street, New York, NY 10019 on Monday, June 22, 1998 at 3:00 p.m.
for the following purposes:
1. To elect two directors for a three-year term to expire at the 2001
Annual Meeting of Stockholders. The present Board of Directors of the
Company has nominated and recommends for election as directors the
following two persons:
Mark Dowley
Isaac Willis
2. To approve the adoption of the Employee Qualified Stock Purchase
Plan and the reservation of 500,000 shares of Common Stock for issuance
thereunder.
3. To approve the adoption of the 1998 Stock Option Plan and the
reservation of 2,000,000 shares of Common Stock for issuance thereunder.
4. To transact such other business as may be properly brought before
the Annual Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Board of Directors has fixed the close
of business on April 23, 1998 as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. A list of
such stockholders shall be open to the examination of any stockholder at the
Annual Meeting and for a period of ten days prior to the date of the Annual
Meeting at the offices of InterVU Inc., 201 Lomas Santa Fe, Solana Beach,
California 92075.
Accompanying this Notice is a Proxy. WHETHER OR NOT YOU EXPECT TO BE AT THE
ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
If you plan to attend the Annual Meeting and wish to vote your shares
personally, you may do so at any time before the Proxy is voted.
All stockholders are cordially invited to attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Danielle D. McGee
Secretary
Solana Beach, California
April 30, 1998
<PAGE> 3
INTERVU INC.
201 LOMAS SANTA FE DRIVE
SOLANA BEACH, CALIFORNIA 92075
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
JUNE 22, 1998
The Board of Directors of InterVU Inc., a Delaware corporation (the
"Company" or "InterVU") is soliciting the enclosed Proxy for use at the Annual
Meeting of Stockholders of the Company to be held on June 22, 1998 (the "Annual
Meeting"), and at any adjournments thereof. This Proxy Statement will be first
sent to stockholders on or about May 20, 1998. Unless contrary instructions are
indicated on the Proxy, all shares represented by valid proxies received
pursuant to this solicitation (and not revoked before they are voted) will be
voted for the election of the Board's nominees for directors. As to any other
business which may properly come before the Annual Meeting and be submitted to a
vote of the stockholders, Proxies received by the Board of Directors will be
voted in accordance with the best judgment of the holders thereof.
A Proxy may be revoked by written notice to the Secretary of the Company at
any time prior to the Annual Meeting, by executing a later Proxy or by attending
the Annual Meeting and voting in person.
The Company will bear the cost of solicitation of Proxies. In addition to
the use of mails, Proxies may be solicited by personal interview, telephone or
telegraph, by officers, directors, and other employees of the Company. The
Company will also request persons, firms, and corporations holding shares in
their names, or in the names of their nominees, which are beneficially owned by
others to send or cause to be sent Proxy material to, and obtain Proxies from,
such beneficial owners and will reimburse such holders for their reasonable
expenses in so doing.
The Company's mailing address is 201 Lomas Santa Fe Drive, Solana Beach,
California 92075.
VOTING
Stockholders of record at the close of business on April 23, 1998 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
or any adjournments thereof.
As of March 31, 1998, 9,380,032 shares of the Company's common stock, $.001
par value per share ("Common Stock"), and 1,280,000 shares of the Company's
Series G Convertible Preferred Stock ("Series G Preferred") were outstanding,
representing the only voting securities of the Company. Each share of Common
Stock is entitled to one vote and each share of Series G Preferred is entitled
to .6298 of a vote. The Common Stock and the Series G Preferred will vote as a
single class and will not vote separately.
Votes cast by Proxy or in person at the Annual Meeting will be counted by
the person appointed by the Company to act as Inspector of Election for the
Annual Meeting. The Inspector of Election will treat shares represented by
Proxies that reflect abstentions or include "broker non-votes" as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions or "broker non-votes" do not constitute a vote "for" or
"against" any matter and thus will be disregarded in the calculation of "votes
cast." Any unmarked Proxies, including those submitted by brokers or nominees,
will be voted in favor of the nominees of the Board of Directors, as indicated
in the accompanying Proxy card.
1
<PAGE> 4
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 29, 1998 by (i) each of the Company's
directors, (ii) each of the Company's Named Executive Officers (as defined
herein), (iii) each person who is known by the Company to own beneficially more
than 5% of the Common Stock and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK COMMON STOCK
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED
------------------- --------------------- ------------------
<S> <C> <C>
Harry E. Gruber(3)............................... 1,007,680 10.7%
Brian Kenner(4).................................. 1,007,680 10.7
Allen B. Gruber(5)............................... 512,657 5.5
Isaac Willis(6).................................. 1,162,336 12.4
Edward E. David, Jr.(7).......................... 25,940 *
Mark Dowley(8)................................... 7,356 *
J. William Grimes................................ -- --
Alan Z. Senter................................... -- --
Douglas A. Augustine(9).......................... 71,322 *
Kenneth L. Ruggiero.............................. -- --
Westchester Group LLC(10)........................ 881,720 9.4
National Broadcasting Company, Inc.(11).......... 1,016,670 10.0
All directors and executive officers as a group
(9 persons)(12)................................ 3,282,319 34.9
</TABLE>
- ---------------
* Less than 1%.
(1) Except as indicated, the address of each person named in the table is c/o
InterVU Inc., 201 Lomas Santa Fe Drive, Solana Beach, California 92075.
(2) Beneficial ownership of directors, officers and 5% or more stockholders
includes both outstanding Common Stock and shares issuable upon exercise of
options that are currently exercisable or will become exercisable within 60
days after the date of this table and shares of Common Stock issuable upon
commission of 1,280,000 shares of Series G Preferred held by National
Broadcasting Company, Inc. ("NBC") which become convertible on July 10,
1998. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
(3) Includes 388,788 shares subject to the Company's repurchase right under an
Amended and Restated Vesting Agreement.
(4) Includes 388,788 shares subject to the Company's repurchase right under an
Amended and Restated Vesting Agreement.
(5) Includes 255,069 shares owned by the Gruber Family Limited Partnership, of
which Allen Gruber is a general partner, and 81,244 shares owned by the
Judith Gruber Living Trust, of which Judith Gruber, Allen Gruber's wife, is
settlor and trustee. The address for Mr. Gruber is 419 Happy Trail, San
Antonio, Texas 78231.
(6) Includes 953,867 shares owned by the Willis Family Trust, of which Mr.
Willis is settlor. Includes 11,878 shares subject to the Company's
repurchase right under a restricted stock agreement and 7,014 shares
issuable upon exercise of options that are currently exercisable or will
become exercisable within 60 days after the date of this table.
(7) Includes 11,878 shares subject to the Company's repurchase right under a
restricted stock agreement and 748 shares issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days
after the date of this table.
(8) Includes 7,356 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table.
2
<PAGE> 5
(9) Includes 41,429 shares subject to the Company's repurchase right under a
restricted stock agreement and 8,347 shares issuable upon exercise of
options that are currently exercisable or will become exercisable within 60
days after the date of this table.
(10) The membership interests of Westchester Group LLC are owned by Marcia
Berman individually, with respect to 99.5% of the interests, and as
custodian for her minor children under the New York Uniform Gifts to Minors
Act, with respect to .5% of the interests. The address for the Westchester
Group LLC is 70 Valley Lane, Chappaqua, New York 10541.
(11) The shares of Series G Preferred owned by NBC become convertible into
Common Stock at the option of the holder on July 10, 1998. The holder of
each share of Series G Preferred has the right to vote on an as-converted
basis. As of the date of this table, NBC owned 100% of the outstanding
Series G Preferred and NBC Multimedia, Inc., a wholly owned subsidiary of
NBC, owned 210,526 shares of Common Stock. As the ultimate parent of NBC,
General Electric Company may be deemed to be the beneficial owner of all
these shares. The address of NBC is 30 Rockefeller Plaza, New York, New
York 10112.
(12) See Notes (3), (4), (6), (7), (8) and (9).
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of six members. The Company's
Amended and Restated Certificate of Incorporation provides for the
classification of the Board of Directors into three classes, as nearly equal in
number as possible, with staggered terms of office and provides that upon the
expiration of the term of office for a class of directors, nominees for such
class shall be elected for a term of three years or until their successors are
duly elected and qualified. At this meeting, two nominees for director are to be
elected as Class I directors. The nominees are Mark Dowley and Isaac Willis. The
Class II and Class III directors have one year and two years, respectively,
remaining on their terms of office. If no contrary indication is made, proxies
in the accompanying form are to be voted for such nominees or, in the event any
such nominee is not a candidate or is unable to serve as a director at the time
of the election (which is not currently expected), for any nominee who shall be
designated by the Board of Directors to fill such vacancy. Both nominees are
members of the present Board of Directors.
INFORMATION REGARDING DIRECTORS
The information set forth below as to each nominee for Director has been
furnished to the Company by the respective nominees for Director:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING AT THE
2001 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Mark Dowley............................ 33 Director
Isaac Willis........................... 57 Director
</TABLE>
Mark Dowley joined the Company as a director in January 1997 and is the
Chief Executive Officer of Momentum IMC, an advertising agency division of
McCann-Erickson, a national advertising firm. Mr. Dowley has over ten years
experience in major event management, promotion, and sponsorship. Mr. Dowley's
past and current clients include the NBA, the PGA Tour, NCAA, The Walt Disney
Company and Universal Studios. Mr. Dowley is also a member of McCann-Erickson's
board of directors. Mr. Dowley received a B.A. in economics from the College of
Wooster.
Isaac Willis has served as a director of the Company since November 1995.
Dr. Willis is a private investor with experience in venture financing and
banking, including the founding of Heritage Bank,
3
<PAGE> 6
Commercial Bank of Georgia and Commercial Bank of Gwinnett. Dr. Willis has been
a Professor and Director of Dermatology Research at Morehouse School of Medicine
since 1983 and was a Past Commander of the 3297th U.S. Army Hospital. Dr. Willis
obtained a M.D. from Howard University and a B.S. in chemistry and mathematics
from Morehouse College.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE
1999 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Edward E. David, Jr.................. 72 Director
Alan Z. Senter....................... 56 Director
</TABLE>
Edward E. David, Jr. has served as a director of the Company since its
inception in August 1995, and has served as President of Edward E. David, Inc.,
a telecommunications consulting firm since 1992. In addition, since April 1996,
Dr. David has served as Vice President of Washington Advisory Group LLC. He has
been Science Advisor to the President of the United States, and Director of the
White House Office of Science and Technology. Dr. David was also President of
Exxon Research and Engineering Company and Executive Director of Bell Telephone
Laboratories. Mr. David serves as a director for Intermagnetics General
Corporation, Spacehab, Inc., California Microwave and Protein Polymar
Technologies, all of which are publicly traded companies. Until recently, he
served as the U.S. Representative to the NATO Science Committee.
Alan Z. Senter joined the Company as a director in September 1997. From
September 1994 to May 1996, Mr. Senter served as Executive Vice President, Chief
Financial Officer and as a member of the Policy Council of Nynex Corporation.
From November 1993 to August 1994 and since June 1996, Mr. Senter has served as
Chairman of Senter Associates, a consulting firm founded by Mr. Senter in
November 1993. From August 1992 to November 1993, Mr. Senter served as Executive
Vice President, Chief Financial Officer and a director of GAF/ISP Corporation.
From January 1990 to July 1992, Mr. Senter served as Vice President of Finance
for Xerox Corporation. Mr. Senter serves on the Board of Directors of Exel, Ltd.
and Advanced Radio Telecom, both publicly traded companies. Mr. Senter obtained
a B.S. in economics and political science from the University of Rhode Island
and an M.B.A. from the University of Chicago.
TERM EXPIRING AT THE
2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
<S> <C> <C>
Harry E. Gruber...................... 46 Chairman of the Board, Chief
Executive Officer and Director
J. William Grimes.................... 57 Vice Chairman of the Board and
Director
</TABLE>
Harry E. Gruber is a founder of InterVU and has served as Chairman and
Chief Executive Officer of the Company since July 1996. From July 1996 to July
1997, Dr. Gruber also served as the Company's President. Prior to founding the
Company, Dr. Gruber founded two start-up biotech ventures, Gensia Inc. and
Viagene Inc., which completed initial public offerings in 1990 and 1993,
respectively. From July 1995 to July 1996, Dr. Gruber served as Chief Scientific
Officer of Gensia, and from 1988 to July 1995, he served as Vice President,
Research of Gensia. Dr. Gruber serves as a director of Vascular Genomics, Inc.,
a privately held company, and as a director of the UCSD Foundation and a member
of the Board of Overseers for the University of Pennsylvania College of Arts and
Sciences. Dr. Gruber obtained his M.D. and B.A. degrees from the University of
Pennsylvania.
J. William Grimes joined the Company as a director in September 1997 and
has served as Vice Chairman of the Board since October 1997. Since July 1995,
Mr. Grimes has worked as a consultant with JWG Communications, Inc., a
communications consulting company he founded in July 1995. He is also a
4
<PAGE> 7
partner of BG Media Investors and serves as a faculty member in the Media
Studies Program at the New School for Social Research, a position he has held
since September 1996. From September 1994 to August 1996, Mr. Grimes held the
position of President and Chief Executive Officer with Zenith Media, a media
buying service company. From October 1991 to December 1993, Mr. Grimes served as
President and Chief Executive Officer of Multimedia, Inc. From November 1988 to
September 1991, Mr. Grimes served as President and Chief Executive Officer of
Univision Holdings, Inc. Mr. Grimes served as President and Chief Executive
Officer of ESPN, Inc. from June 1982 to October 1988. Prior to June 1982, Mr.
Grimes held various positions with CBS, Inc., including his final position as
Executive Vice President of the CBS Radio division. He obtained a B.A. in
English from West Virginia Wesleyan College.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and key employees of the Company and their ages as
of April 30, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kenneth L. Ruggiero.................. 31 Vice President and Chief Financial Officer
Brian Kenner......................... 39 Vice President and Chief Technology Officer
Douglas A. Augustine................. 39 Vice President, Marketing and Sales
Michael Bernstein.................... 38 Vice President of Business Development,
Media
Kenneth W. Colby..................... 49 Vice President, Engineering
Stephen H. Klein..................... 34 Vice President of Business Development,
Networks
</TABLE>
EXECUTIVE OFFICERS
Kenneth L. Ruggiero joined the Company in February 1998 and serves as Vice
President and Chief Financial Officer. From April 1996 to February 1998, Mr.
Ruggiero was employed by NBC. From December 1996 to February 1998, he was the
Chief Financial Officer of NBC Interactive Media, NBC's Internet division. In
this capacity he performed and managed financial reporting, implemented various
policies and procedures and structured and negotiated business development
activities. From April 1996 to December 1996, Mr. Ruggiero was a Manager in
NBC's Business Development and International Finance division. From September
1989 to April 1996, he was employed by Arthur Andersen, an independent public
accounting firm, where he held a number of positions, including most recently
Manager of Corporate Consulting. Mr. Ruggiero is a Certified Public Accountant.
He received an M.B.A. from Columbia University Graduate School of Business and a
B.A. in accounting from the University of Massachusetts, Amherst.
Brian Kenner is a founder of InterVU and has served as Vice President and
Chief Technology Officer of the Company since February 1996. From 1989 to
January 1996, Mr. Kenner was a Project Engineer at Science Applications
International Corporation ("SAIC"), an advanced-technology development and
research organization. As Project Engineer, Mr. Kenner had responsibility for
products ranging from advanced hand-held instrumentation to devices which
digitize, compress, and transmit both moving and still images over public and
proprietary communications networks. Mr. Kenner obtained a B.S. in electrical
engineering from the University of California, San Diego.
Douglas A. Augustine joined the Company in August 1996 as Director of
Corporate Development, and has served as Vice President, Marketing and Sales
since December 1996. Prior to joining the Company, Mr. Augustine was Chief
Operating Officer for Ad:vent Strategic Event Marketing, a division of N.W.
Ayert Partners, a national advertising firm, from February 1996 to August 1996.
From June 1989 to July 1993 and from September 1995 to January 1996, Mr.
Augustine served as President of Arlen Marketing, a company he founded in June
1989. Arlen Marketing served as marketing and licensing agent for the 1992
America's Cup and later provided services to Ad:vent Strategic Event Marketing
in connection with Ad:vent's Olympics projects. From July 1993 through August
1995, Mr. Augustine served as Director of Development and Fundraising for
America(3), an America's Cup syndicate. Mr. Augustine obtained a J.D. degree
from the University of San Diego School of Law and a B.A. degree from the
University of California, Berkeley.
5
<PAGE> 8
KEY EMPLOYEES
Michael Bernstein joined the Company in October 1997 as Vice President of
Business Development, Media. From May 1991 to September 1997, Mr. Bernstein held
a number of positions with Major League Baseball Properties, including most
recently as Vice President, Business Development & New Ventures. Mr. Bernstein
obtained a B.S. in industrial and labor relations from Cornell University and an
M.B.A. from Columbia University Graduate School of Business.
Kenneth W. Colby joined the Company in July 1996 as Director of Engineering
and has served as Vice President, Engineering since March 1997. Mr. Colby has
over 20 years experience in software development and programming and was a
former Director of Research and Development at Integrated Software, a mainframe
graphics company. Mr. Colby has received patents for a variety of computer
programs. He also founded Sedona Software, a research and development company.
Mr. Colby obtained a B.S. in electrical engineering from Purdue University.
Stephen H. Klein joined the Company in May 1996 as Director of Business
Development and Sales and has served as Vice President of Business Development,
Networks since March 1997. From 1994 to 1996, he served as New Business
Development Manager for General Instrument Corporation where he was one of the
originating founders of the SURFboard Program, General Instrument's Internet
cable modem technology and product line. From 1988 to 1992, Mr. Klein held
various product management and technical management positions at General
Instrument's VideoCipher Division. Mr. Klein obtained an M.B.A. from San Diego
State University and a B.S. in engineering from Ohio State University.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held two regularly scheduled meetings and
three special telephonic meetings during 1997. No nominee for director who
served as a director during the past year attended fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings of committees of the Board of Directors on which he
served. The Board of Directors has established a compensation committee (the
"Compensation Committee") and an audit committee (the "Audit Committee"). The
Company does not have a Nominating Committee or any other committee.
COMPENSATION COMMITTEE
The Board of Directors has established the Compensation Committee,
consisting of Messrs. Grimes, Senter and Willis. From September 30, 1997 until
April 14, 1998, Mr. Dowley held the seat on the Compensation Committee now held
by Dr. Willis. The Compensation Committee determines compensation for the
Company's senior executive officers and administers the 1996 Stock Plan and the
1998 Stock Option Plan. The Compensation Committee met once during 1997.
AUDIT COMMITTEE
The Board of Directors has established the Audit Committee consisting of
Messrs. David, Senter and Willis. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee did not meet during 1997.
COMPENSATION OF DIRECTORS
The directors of the Company have never received any cash compensation from
the Company for services rendered as directors. Each of the non-management
directors has received compensation in the form of restricted stock awards or
non-statutory stock options to purchase up to 25,192 shares of Common Stock. Mr.
Grimes received an additional option to purchase up to 25,192 shares of Common
Stock for serving as Vice Chairman of the Board. Dr. Willis received an
additional option to purchase up to 25,192 shares for his
6
<PAGE> 9
additional contributions made to the Company. Such stock awards and options are
subject to repurchase rights or vesting schedules. Mr. Grimes also receives a
consulting fee of $3,000 per month pursuant to a consulting agreement with the
Company.
STOCK COMMITTEE
From December 1996 to August 1997, the Stock Committee of the Company's
Board of Directors, which administered the 1996 Stock Plan, consisted of Dr.
Gruber, the Company's President and Chief Executive Officer, and a former
director of the Company. No options were granted to Dr. Gruber or to such former
director while such individuals served on the Stock Committee. No executive
officer of the Company served on the compensation committee of another entity or
on any other committee of the board of directors of another entity performing
similar functions during the last fiscal year, and no executive officer of the
Company served as a director of another entity that had an executive officer
serving on the Stock Committee of the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that stockholders vote FOR the slate of
nominees set forth above. Proxies solicited by the Board of Directors will be so
voted unless stockholders specify otherwise on the accompanying Proxy.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth certain information concerning compensation
for the years ended December 31, 1996 and 1997 received by the Chief Executive
Officer and executive officers of the Company whose compensation exceeded
$100,000 for either of those years (the "Named Executive Officers"). No other
executive officer of the Company meets the definition of "highly compensated"
within the meaning of the executive compensation disclosure rules of the
Securities and Exchange Commission (the "Commission").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
-------------------------- ---------------------------------------
FISCAL RESTRICTED STOCK NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) UNDERLYING OPTIONS
--------------------------- ------ -------- ------ ---------------- --------------------
<S> <C> <C> <C> <C> <C>
Harry E. Gruber........................ 1997 $184,000 -- $ 6,800 $ --
Chairman and Chief Executive 1996 91,950 -- -- --
Officer
Douglas A. Augustine................... 1997 123,900 -- -- 31,489
Vice President Marketing and Sales 1996 27,541 -- 117,143 --
</TABLE>
- ---------------
(1) Dollar values of restricted stock awards are based on the market price at
the time of grant. With respect to each Named Executive Officer's restricted
stock holdings, the number of shares of Common Stock and the dollar value
thereof at December 31, 1997 are as follows: 1,007,680 and $8,186,520 for
Dr. Gruber; and 62,980 and $509,212 for Mr. Augustine. The value of
restricted stock holdings is based on the fair market value of the Common
Stock on December 31, 1997 ($8.125) less the purchase price paid by the
Named Executive Officer for such shares. Restricted stock awards vest daily
over a five-year period (with the first 20% of the award vesting on the
first anniversary of the date of grant).
7
<PAGE> 10
OPTION GRANTS DURING FISCAL 1997
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1997 to each
of the Named Executive Officers. The Company does not have any outstanding stock
appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE PER EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ------------ -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harry E. Gruber................ -- -- -- -- -- --
Douglas A. Augustine........... 31,490 3.50% $0.18 2/11/07 $88,704 $146,431
2,519 0.28 4.76 5/13/07 7,545 19,122
</TABLE>
- ---------------
(1) The potential realizable values are based on an assumption that the stock
price of the Common Stock will appreciate at the annual rates shown
(compounded annually) from the date of grant until the end of the option
term. These values do not take into account amounts required to be paid as
income taxes under the Internal Revenue Code and any applicable state laws
or option provisions providing for termination of an option following
termination of employment, non-transferability or vesting. These amounts are
calculated based on the requirements promulgated by the Commission and do
not reflect the Company's estimate of future stock price growth of the
shares of the Company's Common Stock.
OPTIONS EXERCISED DURING 1997
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the year ended December 31,
1997, and the unexercised options held and the value thereof at that date, for
each of the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
SHARES FISCAL YEAR END YEAR END(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- --------------- --------------------
<S> <C> <C> <C> <C>
Harry E. Gruber...................... -- -- --/-- --/--
Douglas A. Augustine................. -- -- 5,259/26,231 $41,267/$205,835
</TABLE>
- ---------------
(1) Based on the closing sale price of the Common Stock on December 31, 1997
($8.125), as reported by the Nasdaq National Market, less the option
exercise price.
1996 STOCK PLAN
The Company adopted the 1996 Stock Plan in December 1996 to enable key
employees, officers and consultants of the Company to acquire an equity stake in
the Company, and thus to create in such persons an increased interest in and a
greater concern for the welfare of the Company. The 1996 Stock Plan provided for
aggregate option grants of up to 1,889,400 shares. As of April 29, 1998, options
to purchase an aggregate of 1,079,328 shares of Common Stock at prices ranging
from $.03 to $15.125 were outstanding under the 1996 Stock Plan.
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<PAGE> 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed of
independent outside directors of the Company's Board of Directors. The Committee
reviews and approves each of the elements of the executive compensation program
of the Company and continually assesses the effectiveness and competitiveness of
the program. In addition, the Committee administers the stock option program and
other key provisions of the executive compensation program and reviews with the
Board of Directors all aspects of compensation for the Company's executives.
Compensation Philosophy
The goals of the Company's executive compensation program are to reward the
achievement of the Company's strategic goals and the creation of stockholder
value. The Company positions base salaries slightly below competitive levels;
however, the annual cash or stock bonus is positioned to reward above
competitive levels for exceptional performance relative to the Company's peers.
The Company also believes in providing rewards for the creation of stockholder
value through the use of stock options. The Company and the Committee believe
this philosophy will motivate the executives and, thereby, reinforce the
accomplishments of the Company's strategic and financial goals.
Elements of the Executive Compensation Program
Base Salaries. The Company's salary levels for executive officers are set
at a rate slightly below the median level of other high technology companies at
a comparable stage of development, considering the experience, achievements and
contributions of the employees. Salary increases are designed to reflect
competitive practices in the industry, financial performance of the Company and
individual performance of the executive.
Annual Incentive Plan. The Company has not established an annual incentive
plan.
Long-Term Incentives. The objectives of the Company's long-term incentive
program are to offer opportunities for stock ownership that are competitive with
those at the peer companies and to encourage and create ownership and retention
of the Company's stock by key employees. Grant levels under the Company's
employee stock option plans are made in consideration of awards to officers
within peer companies and an assessment of the executive's tenure,
responsibilities and current stock and option holdings.
CEO Compensation
Dr. Gruber's salary was established in July 1996, prior to formation of the
Committee. Dr. Gruber's salary has been reviewed by the Committee and the
Committee has not adjusted Dr. Gruber's salary. Dr. Gruber's salary is at a
level slightly below CEO salaries at comparable companies.
Section 162(m) Compliance
The Company does not presently anticipate any of the Named Executive
Officers to exceed the million-dollar non-performance based compensation
threshold of Section 162(m) of the Internal Revenue Code. The Company and the
Committee will continue to monitor the compensation levels of the Named
Executive Officers and determine the appropriate response to Section 162(m) when
and if necessary. It is the Company's intent to bring the stock option program
into compliance with Section 162(m), if necessary, to ensure that stock option
grants are excluded from compensation calculation for the purposes of Section
162(m).
COMPENSATION COMMITTEE
J. William Grimes
Alan Z. Senter
Isaac Willis
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<PAGE> 12
PERFORMANCE GRAPH
The following chart presents a comparison of the cumulative total return
since November 19, 1997 of the Company's Common Stock, the Standard & Poors 500
Index and a peer group(1). The graph assumes an initial investment of $100 at
November 19, 1997 and reinvestment of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) INTERVU S&P 500 PEER GROUP
<S> <C> <C> <C>
11/19/97 100.00 100.00 100.00
12/31/97 85.58 106.43 90.12
</TABLE>
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(1) The Company's peer group is comprised of the following issuers: Amazon.com,
Inc., At Home Corp., Broadvision, Inc., Concentric Network Corporation,
Cylinx Corp., EarthLink Network, Inc., Infoseek Corporation, Lycos, Inc.,
Communications Network Solutions, Open Text Corporation, Pairgain
Technologies, Inc., RealNetworks, Inc., Spyglass, Inc., VocalTec
Communications Ltd. and Wavephore, Inc. The returns of each component issuer
of the group were weighted according to the respective issuers' market
capitalizations as of November 19, 1997.
CERTAIN TRANSACTIONS
Upon incorporation of the Company in August 1995, the Company sold an
aggregate of 2,398,278 shares of Common Stock to various individuals for an
aggregate of $952, including 705,387 shares to Harry E. Gruber, 705,387 shares
to Brian Kenner, 599,555 shares to a predecessor of the Westchester Group LLC,
211,609 shares to Ruth Hargis and 176,340 shares to the A.B. Gruber Living Trust
(the "Initial Stockholders"). Allen B. Gruber, the settlor and trustee of the
A.B. Gruber Living Trust, is the brother of Harry E. Gruber.
In March 1996, the Company entered into vesting agreements with each of the
Initial Stockholders (the "Vesting Agreements"). Each Vesting Agreement
initially granted the Company the right to repurchase at the original issue
price all of an Initial Stockholder's unvested shares upon such person's death
or disability or his or her unwillingness to provide the services requested by
the Company in such Vesting Agreement. The Vesting Agreements provided for daily
vesting of restricted shares of Common Stock over a five-year period
10
<PAGE> 13
(with no shares vesting until March 4, 1997). The Vesting Agreements also
granted the Company rights of first refusal to purchase vested shares before
such shares may be sold to third parties. In October 1997, the Company amended
the Vesting Agreements for the Initial Stockholders other than Dr. Gruber and
Mr. Kenner to provide for the termination of such Vesting Agreements (and the
vesting of all shares covered thereby) upon the completion of an initial public
offering by the Company resulting in gross proceeds of at least $7,500,000. The
Vesting Agreements for Dr. Gruber and Mr. Kenner survived completion of the
Company's initial public offering in November 1997 (the "IPO") but were amended
and restated as of October 1997 to provide for the termination, upon completion
of the IPO, of the Company's rights of first refusal to purchase vested shares
and the Company's right to repurchase unvested shares upon the death or
disability of Dr. Gruber or Mr. Kenner, as applicable. The Company's rights to
repurchase unvested shares also would terminate upon a change of control, with
respect to Mr. Gruber, and upon a change of control followed by termination
without cause or reduction of annual cash compensation, with respect to Mr.
Kenner.
On August 30, 1995, the Company sold 172,500 shares of Series A Convertible
Preferred Stock at $1 per share to various accredited investors for total
consideration of $172,500. The Company sold 80,000 of such shares to the A.B.
Gruber Living Trust. Each share of Series A Convertible Preferred Stock was
converted into 2.5192 shares of Common Stock upon the closing of the IPO.
On February 4, 1996, the Company sold an aggregate of 339,562 shares of
Series B Convertible Preferred Stock at $1.27 per share to various accredited
investors for a total consideration of $431,244. The Company sold 50,000 of such
shares to the A.B. Gruber Living Trust, 25,000 of such shares to L. Burton
Gruber, the father of Harry Gruber, 3,000 of such shares to Hope Gruber, the
sister of Harry Gruber, and 200,000 of such shares to Isaac Willis, who has
served as a director of the Company from November 1995 to the present. Each
share of Series B Convertible Preferred Stock was converted into 2.5192 shares
of Common Stock upon the closing of the IPO.
On March 5, 1996, the Company issued 302,296 shares of Common Stock to each
of Harry Gruber and Mr. Kenner and 282,166 shares to a predecessor of
Westchester Group LLC for aggregate proceeds of $1,760.
On March 7, 1996, the Company sold 296,147 shares of Series C Convertible
Preferred Stock at $2.75 per share to various accredited investors for a total
consideration of $814,404. The Company sold 3,500 of such shares to the A.B.
Gruber Living Trust, 3,000 of such shares to L. Burton Gruber and 136,364 of
such shares to Dr. Willis. Each share of Series C Convertible Preferred Stock
was converted into 2.5192 shares of Common Stock upon the closing of the IPO.
On April 17, 1996, the Company sold 96,429 shares of Series D Convertible
Preferred Stock at $7 per share to various accredited investors for a total
consideration of $675,003. The Company sold 7,143 of such shares to Dr. Willis.
Each share of Series D Convertible Preferred Stock was converted into 2.5192
shares of Common Stock upon the closing of the IPO.
On August 9, 1996, the Company sold 154,500 shares of Series E Convertible
Preferred Stock at $10 per share to various accredited investors for a total
consideration of $1,545,000. The Company sold 10,000 of such shares to Dr.
Willis. From November 1996 through February 1997, the Company sold 245,500
additional shares of Series E Convertible Preferred Stock at $10 per share to
various accredited investors for a total consideration of $2,455,000. The
Company sold 54,550 of such shares to Dr. Willis. Each share of Series E
Convertible Preferred Stock was converted into 1.2596 shares of Common Stock
upon the closing of the IPO.
On July 16, 1997, the Company sold 677,498 shares of Series F Convertible
Preferred Stock at $6 per share to various accredited investors for a total
consideration of $4,064,988. The Company sold 290,000 of such shares to Dr.
Willis. The Company received payments for certain of the shares of Series F
Preferred Stock issued on July 16, 1997 prior to such date and accounted for
such payments as advances from stockholders. Each share of Series F Convertible
Preferred Stock was converted into .6318 of one share of Common Stock upon the
closing of the IPO.
As consideration for the establishment of a strategic alliance in October
1997, the Company issued 1,280,000 shares of Series G Preferred to NBC, and NBC
Multimedia granted the Company exclusive rights to deliver most NBC audio/visual
content by means of Web sites operated and controlled by NBC. The
11
<PAGE> 14
Company has granted NBC rights to include shares of Common Stock issuable upon
conversion of the Series G Preferred in certain future registrations of Common
Stock, as well as the right to demand on one occasion only that the Company
register such shares of Common Stock after the Company becomes eligible to use
Form S-3 under the Securities Act of 1933, as amended. NBC has agreed that
neither it, nor its affiliates, will acquire or seek to acquire any of the
Company's securities for a period of one year from October 10, 1997, the date of
the Purchase Agreement.
NBC Multimedia purchased 210,526 shares of Common Stock in a direct
offering in November 1997 at $9.50 per share, the price per share to the public
in the IPO. NBC Multimedia and NBC together currently own approximately 10% of
the outstanding shares of capital stock of the Company. Upon consummation of the
Direct Offering, the Company became obligated to pay NBC Multimedia $2,000,000
in nonrefundable payments.
PROPOSAL 2
PROPOSAL TO APPROVE THE ADOPTION OF THE COMPANY'S
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Company's Employee Qualified Stock Purchase Plan (the "Purchase Plan). The
Purchase Plan, and the rights of participants to make purchases thereunder, are
intended to qualify under the provisions of Sections 421 and 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The purpose of the Purchase Plan
is to maintain competitive equity compensation programs and to provide an
incentive for employees of the Company to acquire a proprietary interest in the
Company through the purchase of Common Stock, thereby more closely aligning the
interests of the employees and the stockholders.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTING POWER OF THE COMPANY'S
STOCK REPRESENTED AND VOTING AT THE ANNUAL MEETING WILL BE REQUIRED FOR APPROVAL
OF THE PURCHASE PLAN. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PURCHASE PLAN.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and is not qualified under Section 401(a) of
the Code. Proceeds received by the Company from the sale of Common Stock
pursuant to the Plan will be used for general corporate purposes.
The following is a description of the material provisions of the Purchase
Plan. A copy of the proposed Purchase Plan is set forth in Appendix "A" to this
Proxy Statement. The summary which follows is not intended to be complete and
reference should be made to the Purchase Plan for a complete statement of its
terms and provisions.
SECURITIES SUBJECT TO THE PLAN
The Purchase Plan provides that an aggregate of 500,000 shares of the
Company's Common Stock may be issued thereunder. The Purchase Plan also provides
for appropriate adjustments in the number and kind of shares subject to the
Purchase Plan and to outstanding Options in the event of a stock split, stock
dividend or certain other similar changes in the Company's Common Stock and in
the event of a reorganization, restructuring or certain other types of
recapitalizations of the Company. The Committee (as herein defined) may make
appropriate adjustments to the aggregate number and/or kind of shares of Common
Stock subject to the Purchase Plan, and the price per share thereof if there is
any restructuring, reorganization, recapitalization, stock dividend, stock split
or other change in the corporate structure of the Company. In the event of any
such merger or reorganization, the offering period under the Purchase Plan shall
terminate immediately prior to the consummation of such merger or reorganization
unless otherwise provided by the Committee.
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<PAGE> 15
ADMINISTRATION
The Purchase Plan is administered by a committee (the "Committee")
appointed by the Board consisting of not less than three members of the Board
who are not officers or employees of the Company or any of its subsidiaries and
who are non-employee directors within the meaning of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
questions of interpretation of the Purchase Plan are determined by the
Committee, whose decisions are final and binding upon all participants.
ELIGIBILITY
Subject to certain limitations imposed by Section 423 of the Code, any
person who is employed by the Company (or any of its majority-owned subsidiaries
that are not excluded from participation by the Committee) for at least twenty
(20) hours per week and more than five (5) months in a calendar year are
eligible to participate in the Purchase Plan, provided that the employee has
been continuously employed for six (6) months on the first day of an offering
period. Eligible employees become participants in the Purchase Plan by
delivering to the Company an enrollment agreement authorizing payroll deductions
prior to the applicable offering period, unless another time for filing the
enrollment agreement is set by the Committee for all eligible employees with
respect to a given offering period.
OFFERING DATES
The Purchase Plan is implemented through a series of 24-month offering
periods, with a new offering period commencing on each February 1 and August 1
during the term of the Purchase Plan. The first offering period (a
twenty-three-month period) commences on September 1, 1998. The last day of each
six-month exercise period during each offering period under the Purchase Plan
(i.e., each July 31 and January 31) will be an exercise date under the Purchase
Plan. The Committee may later change the duration of the offering periods
without stockholder approval.
PURCHASE PRICE
Initially, the purchase price per share at which shares are sold under the
Purchase Plan is equal to the lower of 85% of the fair market value of the
Common Stock on the date of commencement of a 24-month offering period or 85% of
the fair market value of the Common Stock on each exercise date of the option.
The Committee may change the percentage rate from 85%; however, it may never be
less than 85%. The fair market value of the Common Stock on a given date will be
the closing price of the Common Stock on the Nasdaq Stock Market as of such
date. The closing price of the Company's Common Stock on the Nasdaq Stock Market
on April 29, 1998 was $17.50 per share.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions
during an offering period. Currently, the payroll deductions may be any whole
percentage amount between 1% and 15% of a participant's eligible compensation on
each payroll date during the offering period. These percentage amounts are
subject to change at the sole discretion of the Board or the Committee. For
purposes of the Purchase Plan, eligible compensation is defined to include the
participant's full base salary, wages and commissions, but excluding, bonuses,
overtime pay, shift premiums, any payments by the Company or its subsidiaries to
any pension or profit sharing plan, fringe benefits and certain other forms of
extraordinary pay. A participant may discontinue his or her participation in the
Purchase Plan at any time during the offering period. In addition, a participant
may, no more than once during each exercise period, reduce or increase the rate
of payroll deductions. Payroll deductions will commence on the first payday
following the offering date, and will continue at the same rate until the end of
the offering period unless the participant terminates participation in the
Purchase Plan or reduces or increases the rate of the payroll deductions.
In the event that the purchase price per share of Common Stock at the
beginning of any offering period is less than the purchase price per share of
Common Stock at the beginning of any prior offering period which
13
<PAGE> 16
has not yet ended, the Committee in its discretion may terminate the
participation of all participants in the prior offering period and enroll them
in the newly beginning offering period at the same payroll deduction rate.
GRANT OF OPTIONS
On the first day of each offering period, each eligible employee is granted
an option to purchase, on each exercise date during the offering period, a
number of shares of the Company's Common Stock determined by dividing the
participant's contributions to the Purchase Plan by the applicable exercise
price. This option grant limit is subject to change at the sole discretion of
the Board or the Committee. Notwithstanding the foregoing, no employee is
permitted to subscribe for shares under the Purchase Plan if immediately after
the grant of the option, the employee would own 5% or more of the voting power
or value of all classes of stock of the Company or of a parent or of any of its
subsidiaries (including stock which may be purchased under the Purchase Plan or
pursuant to any other options), nor shall any employee be granted an option
which would permit the employee's rights to purchase stock under all of the
Company's employee stock purchase plans to accrue at a rate which exceeds
$25,000 worth of stock (determined based on the fair market value of the shares
at the time the option is granted) in any calendar year.
EXERCISE OF OPTIONS
Unless a participant withdraws from the Purchase Plan, such participant's
option to purchase shares will be exercised automatically on each exercise date
of the offering period to purchase the maximum number of full shares that may be
purchased at the exercise price with the accumulated payroll deductions in the
participant's account. Certificates representing fractional shares will not be
issued.
WITHDRAWAL
A participant's interest in a given offering period may be terminated in
whole, but not in part, by signing and delivering to the Company a notice of
withdrawal from the Purchase Plan. The failure to remain in the continuous
employ of the Company or its participating majority-owned subsidiaries, if any,
for at least 20 hours per week during an offering period will be deemed to be a
withdrawal from that offering period.
NON-TRANSFERABILITY
Options to purchase Common Stock under the Purchase Plan may not be
transferred by a participant other than by will or under the laws of the descent
and distribution and may be exercised during a participant's lifetime only by
the participant.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend or terminate the Purchase
Plan, except that no amendment may be made that would cause the Purchase Plan to
fail to meet the requirements for employee stock purchase plans as defined in
Section 423 of the Code.
FEDERAL INCOME TAX CONSEQUENCES
The income tax consequences of the Plan under current federal law are
summarized below. The discussion is intended to provide only general
information. State and local income tax consequences are not discussed. The Plan
is intended to qualify as an "employee stock purchase plan," as defined in
Section 423 of the Code.
14
<PAGE> 17
If an Option is granted to an employee under the Plan, no taxable income
will result to such employee on the date the Option is granted or on any date
that a semi-annual installment of the Option is exercised. If the employee does
not dispose of the shares of Common Stock purchased upon any exercise of the
Option within two years after the date on which the Option was granted or within
one year after the transfer of the shares of such Common Stock to the employee
(the "Holding Period"), or the employee dies while owning the shares, the
employee will be taxed in the year in which the shares are disposed of, or the
year closing with the employee's death, as follows:
(a) The employee will be subject to ordinary income tax on an amount
equal to the lesser of (i) the excess, if any, of the fair market value of
the shares on the date on which they were disposed of over the amount paid
for the shares, or (ii) the excess, if any, of the fair market value of the
shares on the date the Option was granted over the Option Price; and
(b) Any further gain realized by the employee on the disposition of
the shares (after increasing the basis of these shares by the amount of
ordinary income realized as described in (a) above) will be taxed as
capital gain.
If the employee disposes of the shares of Common Stock purchased upon
exercise of the Option before the expiration of the Holding Period, the employee
will realize ordinary income, reportable for the year of the disposition of such
shares, to the extent of the excess of the fair market value of such shares on
the date on which the Option was exercised, over the Option price for such
shares. Any additional gain realized will be taxable as capital gain. If the
Common Stock is disposed of before the expiration of the Holding Period and the
amount realized is less than the fair market value of the Common Stock at the
time of exercise, the employee will realize (i) ordinary income to the extent of
the excess of the fair market value of such Common Stock on the date on which
the Option was exercised, over the Option price for such Common Stock and (ii)
capital loss to the extent the fair market value of such Common Stock on the
exercise date exceeds the amount realized on the sale. If the employee realizes
ordinary income as a result of a disposition before the expiration of the
Holding Period, the amount of such ordinary income would be deductible by the
Company for federal income tax purposes provided such amount constitutes an
ordinary and necessary business expense.
The foregoing described certain federal income tax consequences to
participating employees in the Purchase Plan. The Company recommends that
employees consult their personal tax advisors with respect to the federal,
foreign (if applicable), state and local tax aspects of option grants, option
exercises and any subsequent dispositions of the Common Stock acquired under the
Purchase Plan.
PARTICIPATION IN PURCHASE PLAN BY EXECUTIVE OFFICERS AND OTHER EMPLOYEES
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases by executive
officers and other employees under the Purchase Plan are not determinable.
PROPOSAL 3
PROPOSAL TO APPROVE THE ADOPTION OF THE COMPANY'S 1998 STOCK OPTION PLAN
On February 25, 1998 the Company's Board of Directors adopted the 1998
Stock Option Plan of InterVU Inc. (the "1998 Plan"). The stockholders are asked
to approve the adoption of the 1998 Plan. In general, the 1998 Plan provides
additional incentives to selected key employees, independent directors and
consultants of the Company. The purpose of the 1998 Plan is to further the
long-term stability and financial success of the Company by retaining key
employees, directors and consultants who are able to contribute to the financial
success of the Company. Moreover, the Board of Directors believes that offering
the key employees, directors and consultants of the Company the opportunity to
become owners of capital stock of the Company will help to align further their
interests with those of the Company's stockholders generally.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTING POWER OF THE COMPANY'S
STOCK REPRESENTED AND VOTING AT THE ANNUAL MEETING WILL BE
15
<PAGE> 18
REQUIRED FOR APPROVAL OF THE 1998 PLAN. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE 1998 PLAN.
The following is a description of the material provisions of the 1998 Plan.
A copy of the proposed 1998 Plan is set forth in Appendix "B" to this Proxy
Statement. The summary which follows is not intended to be complete and
reference should be made to the 1998 Plan for a complete statement of its terms
and provisions.
The principal purposes of the 1998 Plan are to provide incentives for
independent directors, key employees and consultants of the Company and its
subsidiaries through granting of options, thereby stimulating their personal and
active interest in the Company's development and financial success, and inducing
them to remain in the Company's employ.
Under the 1998 Plan, not more than 2,000,000 shares of Common Stock (or
their equivalent in other equity securities) are authorized for issuance upon
exercise of options. Furthermore, the maximum number of shares which may be
subject to options granted under the 1998 Plan to any individual in any fiscal
year cannot exceed 100,000. The shares available under the 1998 Plan upon
exercise of stock options may be either previously unissued shares or treasury
shares, and may be equity securities of the Company other than Common Stock. The
1998 Plan provides for appropriate adjustments in the number and kind of shares
subject to the 1998 Plan and to outstanding grants thereunder in the event of a
distribution, stock dividend or certain other types of recapitalizations,
including restructuring.
A total of 775,954 shares remain available for grant under the Company's
1996 Stock Option Plan. To the extent the Company's stockholders approve the
1998 Plan and the reservation of 2,000,000 shares for issuance thereunder, the
Company will not issue options under the 1996 Stock Option Plan to purchase the
775,954 shares currently reserved for issuance but not subject to options
granted thereunder. Instead, the Company no longer will reserve such shares for
issuance pursuant to the 1996 Stock Option Plan, and such shares will remain as
authorized but unissued shares of the Company, subject to issuances from time to
time by the Company pursuant to an employee benefit plan or otherwise.
If any portion of a stock option terminates or lapses unexercised, or is
canceled upon grant of a new option (which may be at a higher or lower exercise
price than the option so canceled), the shares which were subject to the
unexercised portion of such option will continue to be available for issuance
under the 1998 Plan.
ADMINISTRATION
The 1998 Plan is administered by the Compensation Committee or a
subcommittee thereof (referred to herein as the "Committee"), consisting of at
least two members of the Board, none of whom is an officer or employee of the
Company. However, most decisions regarding independent directors under the 1998
Plan will be made by the Board of Directors. The Committee (or the Board of
Directors in the case of independent directors) is authorized to select from
among the eligible employees, directors and consultants the individuals to whom
options are to be granted and to determine the number of shares to be subject
thereto and the terms and conditions thereof, consistent with the 1998 Plan. The
Committee is also authorized to adopt, amend and rescind rules relating to the
administration of the 1998 Plan.
PAYMENT FOR SHARES
The exercise or purchase price for all options to acquire shares of the
Company's Common Stock, together with any applicable tax required to be
withheld, must be paid in full in cash at the time of exercise or purchase or
may, with the approval of the Committee, be paid in whole or in part in Common
Stock of the Company owned by the Optionee (or issuable upon exercise of the
option) and having a fair market value on the date of exercise equal to the
aggregate exercise price of the shares so to be purchased. The Committee may
also provide, in the terms of an option or other right, that the purchase price
may be payable within thirty days after the date of exercise. The Committee may
also authorize other lawful consideration to be applied to the exercise or
purchase price of an award.
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<PAGE> 19
AMENDMENT AND TERMINATION
Amendments of the 1998 Plan to increase the number of shares as to which
options may be granted in the aggregate or to any individual (except for
adjustments) require the approval of the Company's stockholders. In all other
respects the 1998 Plan can be amended, modified, suspended or terminated by the
Committee, unless such action would otherwise require stockholder approval as a
matter of applicable law, regulation or rule. Amendments of the 1998 Plan will
not, without the consent of the participant, affect such person's rights under
an award previously granted, unless the award itself otherwise expressly so
provides. No termination date is specified for the 1998 Plan.
ELIGIBILITY
Options under the 1998 Plan may be granted to individuals who are then
officers or other employees of the Company or any of its present or future
subsidiaries and who are determined by the Committee to be key employees. Such
awards also may be granted to consultants of the Company selected by the
Committee and independent directors selected by the Board of Directors for
participation in the 1998 Plan. Approximately 50 officers, key employees and
consultants are eligible to participate in the 1998 Plan. More than one option
may be granted to a key employee, independent director or consultant, but the
aggregate fair market value (determined at the time of grant) of shares with
respect to which an Incentive Stock Option is first exercisable by an Optionee
(i.e. "vests") during any calendar year cannot exceed $100,000.
AWARDS UNDER THE 1998 PLAN
The 1998 Plan provides that the Committee may grant or issue stock options.
Each grant or issuance will be set forth in a separate agreement with the person
receiving the award and will indicate the type, terms and conditions of the
award.
Nonqualified stock options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which may not be less than 85% of the fair
market value on the date of grant and usually will become exercisable (in the
discretion of the Committee) in one or more installments after the grant date.
NQSOs may be granted for any term specified by the Committee.
Incentive stock options, if granted, will be designed to comply with the
provisions of the Code and will be subject to restrictions contained in the
Code, including exercise prices equal to at least 100% of fair market value of
Common Stock on the grant date and a ten year restriction on their term, but may
be subsequently modified to disqualify them from treatment as an incentive stock
option. Incentive stock options may be granted only to employees.
The 1998 Plan provides for formula grants of NQSOs to independent
directors. Each independent director serving as a member of the Board of
Directors of the Company and who has been reelected to serve for an additional
term, if applicable, will be granted an option to purchase 5,000 shares of
Common Stock on the date of each annual meeting of stockholders (other than the
1998 Annual Meeting of Stockholders). In addition, each person initially elected
to the Board of Directors of the Company after the adoption of the 1998 Plan
will be granted an option to purchase 20,000 shares of Common Stock on the date
of such election.
MISCELLANEOUS PROVISIONS OF THE 1998 PLAN
Options and other rights to acquire Common Stock of the Company granted
under the 1998 Plan may provide for their termination upon dissolution or
liquidation of the Company, the merger or consolidation of the Company into
another corporation, or the acquisition by another corporation of all or
substantially all of the Company's assets; but in such event the Committee may
also give Optionees the right to exercise their outstanding options or rights in
full during some period prior to such event, even though the options or rights
have not yet become fully exercisable. Options and other rights granted under
the 1998 Plan may provide that in the event of a "change in control" of the
Company (as defined in the option agreement) all previously unexercisable
options and rights become immediately exercisable unless such options and
rights, or portions thereof, are determined by the Committee to constitute, when
exercised, "excess parachute payments" (as
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defined in Section 280G of the Code). If any option or other right does not
contain such limitation, and its exercisability is accelerated upon a change in
control, it is possible that an Optionee may be liable for an excise tax on the
amount attributable to such acceleration (and any other payments made in
connection with such change in control).
The 1998 Plan specifies that the Company may make loans to 1998 Plan
participants to enable them to exercise options granted under the 1998 Plan. The
terms and conditions of such loans, if any are made, are to be set by the
Committee.
In consideration of the granting of a stock option the employee,
independent director or consultant must agree in the written agreement embodying
such award to remain in the employ of, or to continue as a consultant for, the
Company or a subsidiary of the Company for at least one year after the award is
granted.
The dates on which options under the 1998 Plan first become exercisable and
on which they expire will be set forth in individual stock options or other
agreements setting forth the terms of the awards. Such agreements generally will
provide that Options expire upon termination of the Optionee's status as an
employee, consultant or director, although the Committee may provide that such
options continue to be exercisable following a termination without cause, or
following a change in control of the Company, or because of the Optionee's
retirement, death, disability or otherwise. The period during which the right to
exercise an Option vests in the Optionee shall be set by the Committee. However,
unless the Committee states otherwise no Option will be exercisable by an
Optionee subject to Section 16 of the Exchange Act within the period ending six
months and one day after the date the Option is granted. In addition, Options
granted to independent directors shall become exercisable in cumulative annual
installments of 25% on each of the first, second, third, and fourth
anniversaries of the date of the Option grant.
No option to acquire Common Stock granted under the 1998 Plan may be
assigned or transferred by the Optionee, except by will or the laws of intestate
succession, although the shares underlying such rights may be transferred if all
applicable restrictions have lapsed. During the lifetime of the holder of any
option or right, the option or right may be exercised only by the holder.
The Company requires participants to discharge withholding tax obligations
in connection with the exercise of any option or other right granted under the
1998 Plan, or the lapse of restrictions on restricted stock, as a condition to
the issuance or delivery of stock or payment of other compensation pursuant
thereto. Shares held by or to be issued to a participant may also be used to
discharge tax withholding obligations related to exercise of options, subject to
the discretion of the Committee to disapprove such use. In addition, the
Committee may grant to employees a cash bonus in the amount of any tax related
to awards.
FEDERAL INCOME TAX CONSEQUENCES
The income tax consequences of the 1998 Plan under current federal law are
summarized below. The discussion is intended to provide only general
information. State and local income tax consequences are not discussed.
Non-Qualified Stock Options. Holders of non-qualified stock options will
not realize income for federal income tax purposes as a result of the grant of
the option, but normally will realize compensation income upon exercise of the
non-qualified stock option to the extent that the fair market value of the
shares on the date of exercise of the option exceeds the aggregate option
exercise price paid. The Company (or the corporation that is the employer of the
Optionee) is entitled to a deduction in the same amount at the time of exercise
of the option, provided that the Company (or the corporation that is the
employer of the Optionee) reports on a timely basis the taxes on the ordinary
income realized by an Optionee upon the exercise of a non-qualified stock
option.
Optionees who are subject to the short-swing profits restrictions of
Section 16(b) of the Exchange Act ("Insiders") may be affected by Section 83(c)
of the Code. Section 83(c) provides generally that, unless the Insider otherwise
elects, so long as the sale of securities at a profit could subject an Insider
to suit under Section 16(b), the imposition and calculation of the tax on any
compensation income realized will be deferred until the six-month Section 16(b)
period expires. Amendments to the rules under Section 16 of the Exchange
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Act, effective May 1, 1991, provide that option exercises will not constitute
"purchases" for Section 16(b) purposes. As a result, Section 83(c) will no
longer apply to option exercises (provided the option has been held for six
months or more) and Insiders will be taxed on the difference between the option
exercise price and the fair market value of the stock at the date of exercise.
Pursuant to the 1998 Plan, a holder of non-qualified stock options may
exercise such options through delivery of shares of the Company's Common Stock
already held by such holder. The tax consequences resulting from the exercise of
non-qualified stock options through the delivery of already-owned shares are not
completely certain. The Internal Revenue Service in a published ruling has taken
the position that the tax consequences of exercising options with shares of the
Company's Common Stock must be determined separately for the number of shares
received upon exercise equal to the number of shares surrendered (as a tax-free
exchange of stock for stock) and the remaining shares received upon exercise (as
compensation income). Specifically, to the extent the number of shares of the
Company's Common Stock acquired upon exercise of the options equals the number
of shares of Common Stock delivered, the Optionee will not recognize gain and
the Optionee's basis in the Common Stock acquired upon such exercise will equal
the Optionee's basis in the surrendered shares of the Common Stock. Any
additional shares of the Common Stock acquired upon such exercise will result in
compensation income to the Optionee in an amount equal to their then fair market
value and, accordingly, the basis in such additional shares of the Common Stock
will be their fair market value.
A holder exercising a non-qualified stock option may elect to pay amounts
required to be withheld under Federal, state or local law in connection with the
exercise of the option by having a portion of the shares purchased upon exercise
retained by the Company. The shares of stock retained will be treated as sold to
the Company and the holder generally will not realize a gain on the sale, unless
the option is exercised through the delivery of already-owned shares. If the
option is exercised through the delivery of already-owned shares, the holder may
realize gain on the shares of stock retained by the Company to the extent the
fair market value of the shares retained on the date of exercise of the option
exceeds the holder's basis in such shares.
Also, a holder exercising a non-qualified stock option may elect to pay for
the shares of stock purchased upon exercise and all applicable withholding taxes
by having a portion of the shares of stock purchased upon exercise sold by the
holder's broker and the proceeds of the sale paid to the Company. The holder
will realize additional gain or loss on the sale of the shares of stock by the
holder's broker based on the difference between the fair market value of the
shares of stock on the exercise date and the sale price.
Incentive Stock Options. Holders of incentive stock options will not
realize income for federal income tax purposes upon either the grant of the
option or its exercise. However, the amount by which the fair market value of
the shares purchased upon exercise of the option exceeds the option price will
be an "item of adjustment" for purposes of alternative minimum tax. Upon the
sale or other taxable disposition of the shares purchased upon exercise of the
option, long-term capital gain will normally be recognized in the full amount of
the difference between the amount realized and the option exercise price if no
disposition of the shares has taken place within either (i) two years from the
date of grant of the option or (ii) one year from the date of transfer of the
shares to the Optionee upon exercise. If the shares are sold or otherwise
disposed of before the end of such one-year or two-year periods, the difference
between the option price and the fair market value of the shares on the date on
which the option is exercised will be taxed as ordinary income; the balance of
the gain, if any, will be taxed as capital gain. If there is a disposition of
the shares before the expiration of such one-year or two-year periods and the
amount realized is less than the fair market value of the shares at the date of
exercise, the Optionee's ordinary income is limited to the amount realized less
the option exercise price paid. The Company (or other employer corporation) will
be entitled to a tax deduction in regard to an incentive stock option only to
the extent the Optionee has ordinary income upon sale or other disposition of
the shares received upon exercise of the option.
As with non-qualified stock options, a holder of incentive stock options
may exercise such options through delivery of shares of the Company's Common
Stock already held by such holder. Although the analysis in this paragraph is
under study by the Internal Revenue Service, pursuant to Proposed Treasury
Regulation Section 1.422A-2, the tax consequences of exercising incentive stock
options with shares of the Company's
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Common Stock must be analyzed separately for the number of shares received upon
exercise equal to the number of shares surrendered (as a tax-free exchange of
stock for stock) and the remaining shares received upon exercise (as an
incentive stock option transaction). Specifically, the Optionee's basis in the
Company's Common Stock acquired upon such exercise, to the extent of the number
of shares delivered, is equal to his or her basis in the surrendered shares. The
Optionee's basis in any additional shares of Common Stock acquired upon such
exercise is zero. If an Optionee delivers Common Stock acquired by the exercise
of incentive stock options to acquire other Common Stock in connection with the
exercise of incentive stock options, such Optionee will recognize compensation
income on the transaction if the delivered Common Stock has not been held for
the required one-year or two-year holding period. In addition, any sale or other
disposition of Common Stock acquired by exercising the incentive stock options
through delivery of the Company's Common Stock, within the one-year or two-year
period, will be viewed first as a disposition of Common Stock with the zero
basis.
A holder exercising an incentive stock option may elect to pay for the
shares of stock purchased upon exercise by having a portion of the shares of
stock purchased upon exercise sold by the holder's broker and the proceeds of
the sale paid to the Company. The sale of the shares of stock by the holder's
broker will be a disposition of the shares before the end of the one-year or
two-year holding period. As a result, the difference between the option price of
the shares of stock sold by the broker and the fair market value of the shares
of stock, determined on the date on which the option is exercised, will be taxed
as ordinary income; the balance of any gain will be taxed as capital gain. If
the amount realized on the sale of the stock sold by the broker is less than the
fair market value of the shares on the date of exercise, the holder's ordinary
income is limited to the amount realized less the option exercise price paid.
The Company (or other employer corporation) will be entitled to a tax deduction
to the extent the holder has ordinary income upon the sale of the shares of
stock sold by the holder's broker.
GENERAL
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP to serve as the
Company's independent accountants for the 1998 fiscal year.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under Section 16(a) of the Exchange Act, directors, officers and beneficial
owners of 10 percent or more of the Company's Common Stock ("Reporting Persons")
are required to report to the Commission on a timely basis the initiation of
their status as a Reporting Person and any changes with respect to their
beneficial ownership of the Company's Common Stock. Based solely on its review
of such forms received by it and the written representations of its Reporting
Persons, the Company has determined that no Reporting Persons known to it were
delinquent with respect to his or her reporting obligations as set forth in
Section 16(a) of the Exchange Act, except that a Form 3 for William Grimes, the
Company's Vice Chairman of the Board, was filed on November 21, 1997, two days
after such form was required to be filed.
STOCKHOLDER PROPOSALS
A proposal to be considered for inclusion in the Company's proxy statement
for the next annual meeting shall be received at the Company's principal
executive offices not later than January 20, 1999.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1997 will
be mailed to stockholders of record on or about May 20, 1997. The Annual Report
does not constitute, and should not be considered, a part of this Proxy
solicitation material.
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If any person who was a beneficial owner of Common Stock of the Company on
the record date for the Annual Meeting of Stockholders desires additional
information, a copy of the Company's Annual Report on Form 10-K will be
furnished without charge upon receipt of a written request identifying the
person so requesting a report as a stockholder of the Company at such date.
Requests should be directed to InterVU Inc., 201 Lomas Santa Fe Drive, Solana
Beach, California 92075, Attention: Secretary.
OTHER MATTERS
The Board of Directors does not know of any matter to be presented at the
Annual Meeting which is not listed on the Notice of Annual Meeting and discussed
above. If other matters should properly come before the meeting, however, the
persons named in the accompanying Proxy will vote all Proxies in accordance with
their best judgment.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Danielle D. McGee
Secretary
Dated: April 30, 1998
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APPENDIX A
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN OF INTERVU INC.
The Employee Qualified Stock Purchase Plan of InterVU, Inc. (the "Plan")
shall be established and operated in accordance with the following terms and
provisions.
1. DEFINITIONS
As used in the Plan the following terms shall have the meanings set forth
below:
"APPLICABLE PERCENTAGE" means the percentage used to determine the
Exercise Price of shares with respect to a given Offering Period as
determined by the Committee pursuant to Section 9 below.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer
the Plan as described in Section 4 below.
"COMMON STOCK" means the Common Stock, $0.001 par value, of the
Company.
"COMPANY" means InterVU Inc., a Delaware corporation.
"CONTINUOUS EMPLOYMENT" means the absence of any interruption or
termination of service as an Employee with the Company and/or its
Participating Subsidiaries. Continuous Employment shall not be considered
interrupted in the case of a leave of absence agreed to in writing by the
Company, provided that such leave is for a period of not more than ninety
(90) days or reemployment upon the expiration of such leave is guaranteed
by contract or statute.
"ELIGIBLE EMPLOYEE" means, subject to limitations imposed by Section
423(b) of the Code, any Employee who is Continuously Employed by the
Company or a Participating Subsidiary during the six (6) month period
ending on a Grant Date. Each Employee who is an Eligible Employee as of a
Grant Date shall be eligible to participate in the Plan for the Offering
Period beginning on that Grant Date.
"ELIGIBLE REGULAR COMPENSATION" means, with respect to each
Participant for each pay period, the full base salary, wages and
commissions paid to such Participant by the Company or a Participating
Subsidiary. Except as otherwise determined by the Committee, "Eligible
Regular Compensation" does not include:
(i) bonuses, overtime pay or shift premiums,
(ii) any amounts contributed by the Company or a Participating
Subsidiary to any pension plan or plan of deferred compensation,
(iii) any automobile or relocation allowances (or reimbursement for
any such expenses),
(iv) any amounts paid as a starting bonus or finder's fee,
(v) any amounts realized from the exercise of qualified or
non-qualified stock options,
(vi) any amounts paid by the Company or a Participating Subsidiary
for other fringe benefits, such as health and welfare, hospitalization
and group life insurance benefits, or perquisites, or paid in lieu of
such benefits, such as cash-out of credits generated under a plan
qualified tinder Code Section 125, or
(vii) other similar forms of extraordinary compensation.
"EMPLOYEE" means any person, including an officer, who is customarily
employed for at least twenty (20) hours per week and more than five (5)
months in a calendar year by the Company or one of its Participating
Subsidiaries.
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"EXERCISE DATE" means each July 31 and January 31 during each Offering
Period.
"EXERCISE PERIOD" means a period commencing on February 1 and
terminating on the following July 31, or commencing on August 1 and
terminating on the following January 31; provided, however, that
notwithstanding anything to the contrary in this Plan, the first Exercise
Period under this Plan shall be the period commencing on September 1, 1998
and ending on January 31, 1999.
"EXERCISE PRICE" means the price per share of shares offered in a
given Offering Period determined as provided in Section 9 below.
"FAIR MARKET VALUE" means, with respect to a share of Common Stock as
of any Grant Date or Exercise Date, the closing price of such Common Stock
on the Nasdaq Stock Market on such date, as reported in the Wall Street
Journal. In the event that such a closing price is not available for a
Grant Date or an Exercise Date, the Fair Market Value of a share of Common
Stock on such date shall be the closing price of a share of the Common
Stock on the Nasdaq Stock Market on the last business day prior to such
date or such other amount as may be determined by the Committee by any fair
and reasonable means.
"GRANT DATE" means the first date of each Offering Period.
"OFFERING PERIOD" means a period of twenty-four (24) months during
which an option granted pursuant to the Plan may be exercised; provided,
however, that notwithstanding anything to the contrary in this Plan, the
first Offering Period under this Plan shall be the twenty-three (23) month
period beginning on September 1, 1998 and ending on July 31, 2000. A new
Offering Period shall begin on each February 1 and August 1.
"PARTICIPANT" means an Eligible Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company
as provided in Section 6 below.
"PARTICIPATING SUBSIDIARY" means any Subsidiary other than a
Subsidiary excluded from participation in the Plan by the Committee, in its
sole discretion.
"PLAN" means this Employee Qualified Stock Purchase Plan of InterVU
Inc..
"PLAN CONTRIBUTIONS" means, with respect to each Participant, the
payroll deductions withheld from the Eligible Regular Compensation of such
Participant and contributed to the Plan for such Participant as provided in
Section 7 of the Plan, and any other amounts contributed to the Plan for
such Participant in accordance with the terms of the Plan.
"SUBSIDIARY" means any corporation, domestic or foreign, of which the
Company owns, directly or indirectly, not less than 50% of the total
combined voting power of all classes of stock or other equity interests and
that otherwise qualifies as a "subsidiary corporation" within the meaning
of Section 424(f) of the Code or any successor thereto.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to maintain a competitive equity compensation
program to attract, motivate, retain and compensate present and future employees
of the Company and its Participating Subsidiaries and to provide incentive for
such employees to acquire a proprietary interest (or increase an existing
proprietary interest) in the Company through the purchase of Common Stock, and
therefore more closely align the interests of the employees and the
stockholders. It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Code. Accordingly, the
provisions of the Plan shall be administered, interpreted and construed in a
manner consistent with the requirements of that Section of the Code.
3. SHARES RESERVED FOR THE PLAN
There shall be reserved for issuance and purchase by Employees under the
Plan an aggregate of 500,000 shares of Common Stock, subject to adjustment as
provided in Section 14 below. Shares of Common Stock
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subject to the Plan may be newly issued shares or shares reacquired in private
transactions or open market purchases. If and to the extent that any right to
purchase reserved shares shall not be exercised by any Employee for any reason
or if such right to purchase shall terminate as provided herein, shares that
have not been so purchased hereunder shall again become available for the
purposes of the Plan unless the Plan shall have been terminated, but all shares
sold under the Plan, regardless of source, shall be counted against the
limitation set forth above.
4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a Committee appointed by, and which
shall serve at the pleasure of, the Board. The Committee shall consist of not
less than three (3) members of the Board who are not officers or employees of
the Company or of any of its Subsidiaries and who are non-employee directors
within the terms of Rule l6b-3 promulgated under the Securities Exchange Act of
1934. The Committee shall have authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan,
all of which actions and determinations shall be final, conclusive and binding
on all persons.
(b) The Committee may request advice or assistance or employ such other
persons as it in its absolute discretion deems necessary or appropriate for the
proper administration of the Plan, including, but not limited to employing a
brokerage firm, bank or other financial institution to assist in the purchase of
shares, delivery of reports or other administrative aspects of the Plan.
5. OFFERING PERIODS
The Plan shall be implemented by consecutive Offering Periods. The
Committee shall have the power to change the duration of Offering Periods with
respect to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
6. ELECTION TO PARTICIPATE IN THE PLAN
(a) Each Eligible Employee may elect to participate in an Offering Period
under the Plan by completing an enrollment agreement in the form provided by the
Company and filing such enrollment agreement with the Company prior to the
applicable Grant Date of such Offering Period, unless another time for filing
the enrollment form is set by the Committee for all Eligible Employees with
respect to a given Offering Period. An Eligible Employee may participate in an
Offering Period only if, as of the Grant Date of such Offering Period, such
Employee is not participating in any prior Offering Period which is continuing
at the time of such proposed enrollment.
(b) Except as otherwise determined by the Committee under rules applicable
to all Eligible Employees, payroll deductions for a Participant shall commence
on the first payroll date following the Grant Date and shall end on the last
payroll date in the Offering Period to which such authorization is applicable,
unless sooner terminated by the Participant as provided in Section 11.
(c) Unless a Participant elects otherwise prior to the Grant Date of the
immediately succeeding Offering Period, an Eligible Employee who is
participating in an Offering Period as of the last Exercise Date of such
Offering Period (the "Prior Offering Period") shall be deemed (i) to have
elected to participate in the immediately succeeding Offering Period and (ii) to
have authorized the same payroll deduction for such immediately succeeding
Offering Period as was in effect for such Participant immediately prior to the
expiration or termination of the Prior Offering Period.
(d) The Committee, in its discretion, may terminate the participation of
all Participants in any Offering Period as of the last day of any Exercise
Period (a "Termination Date") and enroll such Participants in the new Offering
Period commencing immediately following such Termination Date if the Exercise
Price determined as of the Grant Date for such new Offering Period is lower than
the Exercise Price determined as of the Grant Date of the Offering Period for
which the Participants' participation is being terminated. In such
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event, each of such Participants shall be deemed for purposes of this Plan (i)
to have elected to participate in such new Offering Period and (ii) to have
authorized the same payroll deduction for such new Offering Period as would have
been in effect for the terminated Offering Period had it not been terminated.
7. PAYROLL DEDUCTIONS
(a) Except as otherwise provided in Section 7(c) below or as authorized by
the Committee pursuant to Section 7(d) below, all Participant contributions to
the Plan shall be made only by payroll deductions. At the time a Participant
files the enrollment agreement with respect to an Offering Period, the
Participant may authorize payroll deductions to be made on each payroll date
during the Offering Period in an amount of from 1% to 15% of the Eligible
Regular Compensation which the Participant receives on each payroll date during
such Offering Period. The amount of such payroll deductions shall be a whole
percentage (i.e., 1%, 2%, 3%, etc.) of the Participant's Eligible Regular
Compensation.
(b) A Participant may as of the beginning of any Exercise Period reduce or
increase (subject to the limitations of Section 7(a) above) the rate of his or
her payroll deductions by completing and filing with the Company prior to the
first day of such Exercise Period a change notice in the form provided by the
Company. In addition, a Participant may at any time during an Offering Period
(but no more than once during each Exercise Period) reduce the rate of his or
her payroll deductions by completing and filing with the Company a change notice
in the form provided by the Company. Any such reduction in the rate of a
Participant's payroll deductions shall be effective as of the pay period
specified by the Participant in the Participant's change notice, but in no event
sooner than as may practicably be implemented by the Company. Any increase in
the rate of a Participant's payroll deductions and, except as expressly provided
above in this Section 7(b), any reduction in the rate of a Participant's payroll
deductions shall be effective only as of the first day of an Exercise Period.
(c) Notwithstanding anything to the contrary in the foregoing, the
Committee may permit Participants to make additional contributions to the Plan
subject to such terms and conditions as the Committee may in its discretion
determine. All such additional contributions shall be made in a manner
consistent with the provisions of Section 423 of the Code or any successor
thereto, and shall be held in Participants' accounts and applied to the purchase
of shares of Common Stock pursuant to options granted under this Plan in the
same manner as payroll deductions contributed to the Plan as provided above.
(d) All Plan Contributions made for a Participant shall be deposited in the
Company's general corporate account and shall be credited to the Participant's
account under the Plan. No interest shall accrue or be credited with respect to
a Participant's Plan Contributions. All Plan Contributions received or held by
the Company may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Plan Contributions from any
other corporate funds.
8. GRANT OF OPTIONS
(a) On the Grant Date of each Offering Period, subject to the limitations
set forth in Sections 3 and 8(b) hereof, each Eligible Employee shall be granted
an option to purchase on each Exercise Date during such Offering Period (at the
Exercise Price determined as provided in Section 9 below) a number of shares of
the Company's Common Stock determined by dividing such Eligible Employee's Plan
Contributions accumulated prior to such Exercise Date and retained in his or her
account as of the Exercise Date by the Exercise Price determined as provided in
Section 9 below.
(b) Notwithstanding any provision of the Plan to the contrary, no Employee
shall be granted an option under the Plan (i) if, 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 stock and/or hold
outstanding options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary of the Company, or (ii) which permits such Employee's rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
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9. EXERCISE PRICE
The Exercise Price of each of the shares offered in a given Offering Period
shall be the lower of: (i) the Applicable Percentage of the Fair Market Value of
a share of Common Stock on the Grant Date or (ii) the Applicable Percentage of
the Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to the first Offering Period under the Plan
(i.e., the Offering Period beginning September 1, 1998, and ending August 30,
2000) shall be 85%. Thereafter, the Applicable Percentage with respect to each
Offering Period shall be 100% reduced by such number of percentage points (if
any), not in excess of fifteen (15), as the Committee shall determine. For
example, if the Committee determines to allow the maximum reduction of fifteen
(15) percentage points with respect to an Offering Period, the Applicable
Percentage with respect to such Offering Period will be 85%. The Committee shall
establish the Applicable Percentage with respect to a given Offering Period not
less than fifteen (15) days prior to the Grant Date with respect to such
Offering Period; provided, however, that in the event that the Committee does
not so establish the Applicable Percentage with respect to an Offering Period,
the Applicable Percentage with respect to such Offering Period shall be the same
Applicable Percentage as was in effect with respect to the immediately preceding
Offering Period.
10. EXERCISE OF OPTIONS
Unless the Participant withdraws from the Plan as provided in Section 11
below, the Participant's option for the purchase of shares will be exercised
automatically on each Exercise Date, and the maximum number of shares subject to
option will be purchased for the Participant at the applicable Exercise Price
with the accumulated Plan Contributions credited to the Participant's account
under this Plan. Certificates representing fractional shares will not be issued.
Any amount remaining in the Participant's account after such purchase shall be
applied toward the purchase of whole shares of Common Stock pursuant to the
option, if any, granted to such participant for the next following Offering
Period.
11. WITHDRAWAL; TERMINATION OF EMPLOYMENT
(a) A Participant may withdraw all but not less than all of the Plan
Contributions credited to the Participant's account under the Plan at any time
by giving written notice to the Company. All of the Participant's Plan
Contributions credited to the Participant's account will be paid to him or her
as soon as administratively practical after receipt of the Participant's notice
of withdrawal, the Participant's participation in the Plan will be automatically
terminated, and no further payroll deductions for the purchase of shares will be
made. Payroll deductions will not resume on behalf of a Participant who has
withdrawn from the Plan (a "Former Participant") unless the Former Participant
enrolls in a subsequent Offering Period in accordance with Section 6(a) hereof.
(b) Upon termination of a Participant's employment with the Company and/or
its Participating Subsidiaries prior to the Exercise Date of an Offering Period
for any reason, including retirement or death, the Plan Contributions credited
to the Participant's account will be returned to the Participant or, in the case
of death, to the Participant's estate, as soon as administratively practical,
and the Participant's options to purchase shares under the Plan will be
automatically terminated.
(c) In the event a Participant fails to maintain his or her status as an
Employee during an Offering Period, the Participant will be deemed to have
elected to withdraw from the Plan, the Plan Contributions credited to the
Participant's account will be returned to the Participant as soon as
administratively practical, and the Participant's options to purchase shares
under the Plan will be terminated.
(d) A Participant's withdrawal from an Offering Period will not have any
effect upon the Participant's eligibility to participate in any succeeding
Offering Periods or in any similar plan which may hereafter be adopted by the
Company.
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12. TRANSFERABILITY
Options to purchase Common Stock granted under the Plan are not
transferable by a Participant and are exercisable during a Participant's
lifetime only by the Participant.
13. REPORTS
Individual accounts will be maintained for each Participant in the Plan.
Statements of account will be given to Participants semi-annually in due course
following each Exercise Date, which statements will set forth the amounts of
payroll deductions, the per share purchase price, the number of shares purchased
and the remaining cash balance, if any.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the outstanding shares of Common Stock of the Company are changed
into or are exchanged for a different number or kind of shares, as a result of
one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the committee, appropriate adjustments shall be made
in the number and/or kind of shares, and the per-share option price thereof,
which may be issued in the aggregate and to any Participant upon exercise of
options granted under the Plan.
(b) In the event of the sale, merger, dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee.
(c) In all cases, the Committee shall have full discretion to exercise any
of the powers and authority provided under this Section 14, and the Committee's
actions hereunder shall be final and binding on all Participants. No fractional
shares of stock shall be issued under the Plan pursuant to any adjustment
authorized under the provisions of this Section 14.
15. AMENDMENT OF THE PLAN
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code or any
successor thereto, including, without limitation, stockholder approval if
required.
16. TERMINATION OF THE PLAN
The Plan and all rights of Employees hereunder shall terminate on the
earlier of:
(a) the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining
available for purchase under the Plan;
(b) such date as is determined by the Board in its discretion; or
(c) February 28, 2008.
In the event that the Plan terminates under circumstances described in
Section 16(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.
17. 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.
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18. STOCKHOLDER APPROVAL
The Plan shall become effective on September 1, 1998. The Plan shall be
subject to approval by the stockholders of the Company within twelve months
before or after the date the Plan is adopted by the Board. If such stockholder
approval is obtained at a duly held stockholders' meeting, it may be obtained by
the affirmative vote of the holders of a majority of the outstanding shares of
the Company present or represented and entitled to vote thereon. If such
stockholder approval is not obtained, the Plan and all rights to the Common
Stock purchased under the Plan shall be null and void and shall have no effect.
19. CONDITIONS UPON ISSUANCE OF SHARES
(a) The Plan, the grant and exercise of options to purchase shares of
Common Stock under the Plan, and the Company's obligation to sell and deliver
shares upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required.
(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to federal or state income tax laws of such
amounts as the Company determines it is required to withhold in connection with
the purchase or sale by a Participant of any Common Stock acquired pursuant to
the Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
20. EXPENSES OF THE PLAN
All costs and expenses incurred in administering the Plan shall be paid by
the Company, except that any stamp duties or transfer taxes applicable to
participation in the Plan may be charged to the account of such Participant by
the Company. Any brokerage fees for the purchase of shares by a Participant
shall be paid by the Company, but any brokerage fees for the sale of shares by a
Participant shall be borne by the Participant.
21. NO EMPLOYMENT RIGHTS
The Plan does not, directly or indirectly, create any right for the benefit
of any employee or class of employees to purchase any shares under the Plan, or
create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an employee's employment at any time.
22. APPLICABLE LAW
The laws of the State of Delaware shall govern all matters relating to this
Plan except to the extent (if any) superseded by the laws of the United States.
23. HEADINGS
Headings are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
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APPENDIX B
THE 1998 STOCK OPTION PLAN
OF
INTERVU INC.
InterVU Inc., a Delaware corporation (the "Company"), has adopted The 1998
Stock Option Plan of InterVU Inc. (the "Plan"), effective , 1998, for
the benefit of its eligible employees, consultants and directors. The Plan
consists of two plans, one for the benefit of key Employees (as such term is
defined below) and consultants and one for the benefit of Independent Directors
(as such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
[and consultants] to further the growth, development and financial success
of the Company by personally benefiting through the ownership of Company
stock which recognizes such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long
range success of the Company by offering them an opportunity to own stock
in the Company which will reflect the growth, development and financial
success of the Company.
ARTICLE I.
DEFINITIONS
1.1. General. Wherever the following terms are used in this Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2. Award Limit. "Award Limit" shall mean 100,000 shares of Common Stock,
as adjusted pursuant to Section 8.3.
1.3. Board. "Board" shall mean the Board of Directors of the Company.
1.4. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.5. Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee of the Board, appointed as provided in Section 7.1.
1.6. Common Stock. "Common Stock" shall mean the common stock of the
Company, $.001 par value per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
1.7. Company. "Company" shall mean InterVU Inc., a Delaware corporation.
1.8. Corporate Transaction. "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, to form a
holding company or to effect a similar reorganization as to form whereupon
this Plan and all Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a) above; or
(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's
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outstanding securities are transferred or issued to a person or persons
different from those who held such securities immediately prior to such
merger.
1.9. Director. "Director" shall mean a member of the Board.
1.10. Disability. "Disability" shall mean, with respect to any Optionee,
(i) the suffering of any mental or physical illness, disability or incapacity
that shall in all material aspects preclude such Optionee from performing his or
her directorial, employment or consultant duties, or (ii) the absence of such
Optionee from his or her directorial, employment or consultant duties by reason
of any mental or physical illness, disability or incapacity for a period of six
(6) months during any twelve (12) month period; provided, however, in either
case, that such illness, disability or incapacity shall be reasonably determined
to be of a permanent nature by the Committee (or the Board in the case of
Options granted to Independent Directors).
1.11. Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.12. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.13. Fair Market Value. "Fair Market Value" of a share of Common Stock as
of a given date shall be: (i) the closing sale price of a share of Common Stock
on the principal exchange on which the Common Stock is then trading, if any, on
such date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred; (ii) if the Common Stock is
not traded on an exchange but is quoted on Nasdaq or a successor quotation
system, (1) the last sales price (if the Common Stock is then quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market) or (2) the mean between
the closing representative bid and asked prices (in all other cases) for a share
of the Common Stock on such date, or, if shares were not traded on such date,
then on the next preceding trading day during which a sale occurred, as reported
by Nasdaq or such successor quotation system; (iii) if the Common Stock is not
publicly traded on an exchange and not quoted on Nasdaq or a successor quotation
system, the mean between the closing bid and asked prices for a share of Common
Stock on such date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred, as determined in good faith
by the Committee; or (iv) if the Common Stock is not publicly traded, the fair
market value of a share of Common Stock established by the Committee (or Board
in the case of Options granted to Independent Directors) acting in good faith.
1.14. Incentive Stock Option. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.
1.15. Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
1.16. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
1.17. Option. "Option" shall mean a stock option granted under Article III
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
1.18. Option Shares. "Option Shares" shall mean shares of Common Stock
acquired by Optionees through the exercise of Options under this Plan.
1.19. Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.20. Person. "Person" shall mean a corporation, an association, a
partnership, a trust, a limited liability company, an organization, a business
or an individual.
1.21. Plan. "Plan" shall mean The 1998 Stock Option Plan of InterVU Inc.
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1.22. QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.23. Rule 16b-3.5 "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.24. Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.25. Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one (1) of the other corporations in such chain.
1.26. Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee as a consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death, Disability or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or any Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of limitation,
the question of whether a Termination of Consultancy resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Consultancy. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.27. Termination of Directorship. "Termination of Directorship" shall mean
the time when an Optionee who is an Independent Director ceases to be a Director
for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death, Disability or retirement. The Board,
in its sole and absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Directorship with respect to
Independent Directors.
1.28. Termination of Employment. "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee and the Company
or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, unless otherwise
determined by the Committee in its discretion, a leave of absence, change in
status from an employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Employment if,
and to the extent that, such leave of absence, change in status or other change
interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate an Employee's employment at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
1.29. Termination for Cause. "Termination for Cause" shall mean the time
when the Independent Director-employer, employee-employer or consultant-employer
relationship between an Optionee and the Company or any Subsidiary is terminated
for cause, as termination for cause is defined in the Optionee's directorial,
employment or consultancy agreement; provided however, that if termination for
cause is not
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therein defined, it shall have such meaning, in conformance with applicable law,
as the Committee (or the Board in the case of termination for cause of an
Independent Director) shall determine is appropriate.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Options shall be Common Stock. The
aggregate number of such shares which may be issued upon exercise of such
options under the Plan shall be 2,000,000. The shares of Common Stock of the
Company issuable upon exercise of such options may be either previously
authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any fiscal year of the Company shall not
exceed the Award Limit. To the extent required by Section 162(m) of the Code,
shares subject to Options which are canceled continue to be counted against the
Award Limit and if, after grant of an Option, the price of shares subject to
such Option is reduced, the transaction is treated as a cancellation of the
Option and a grant of a new Option and both the Option deemed to be canceled and
the Option deemed to be granted are counted against the Award Limit.
2.2. Add-back of Options. If any Option to acquire shares of Common Stock
under this Plan expires or is canceled without having been fully exercised, the
number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration, cancellation or exercise may again be
available for the granting of Options hereunder, subject to the limitations of
Section 2.1. Furthermore, any shares subject to Options which are adjusted
pursuant to Section 8.3 and become exercisable with respect to shares of stock
of another corporation shall be considered cancelled and may again be available
for the granting of Options hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or withheld by
the Company upon the exercise of any Option under this Plan, in payment of the
exercise price thereof, may again be available for the granting of Options
hereunder, subject to the limitations of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock may again be available
for the granting of Options if such action would cause an Incentive Stock Option
to fail to qualify as an incentive stock option under Section 422 of the Code.
ARTICLE III.
GRANTING OF OPTIONS
3.1. Eligibility. Any Independent Director, Employee or consultant selected
by the Committee (or the Board in the case of Options granted to Independent
Directors) pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option.
3.2. Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
3.3. Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.
3.4. Granting of Options.
(a) The Committee (or the Board in the case of Options granted to
Independent Directors) shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from among
the Independent Directors, key Employees and consultants (including
Independent Directors, Employees and consultants
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who have previously received Options or other awards under this Plan) such
of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to the selected Independent Directors, key
Employees and consultants;
(iii) Subject to Section 3.3, determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent
with this Plan; provided, however, that the terms and conditions of Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code.
(b) Upon the selection of an Independent Director, key Employee or
consultant to be granted an Option, the Committee (or the Board in the case of
Options granted to Independent Directors) shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant of the
Option as it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee (or the Board in the case of Options granted to
Independent Directors) may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Independent
Director, Employee or consultant that such Independent Director, Employee or
consultant surrender for cancellation some or all of the unexercised Options or
other rights which have been previously granted to such Independent Director,
Employee or consultant under this Plan or otherwise. An Option, the grant of
which is conditioned upon such surrender, may have an option price lower (or
higher) than the exercise price of such surrendered Option or other award, may
cover the same (or a lesser or greater) number of shares as such surrendered
Option or other award, may contain such other terms as the Committee (or the
Board in the case of Options granted to Independent Directors) deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.
(d) During the term of the Plan, each person who is an Independent Director
shall be granted an Option to purchase five thousand (5,000) shares of Common
Stock (subject to adjustment as provided in Section 8.3) on the date of each
annual meeting of stockholders (other than the 1998 Annual Meeting of
Stockholders); provided that such Independent Director is then serving as a
member of the Board and, if applicable, has been reelected to serve for an
additional term as a member of the Board. During the term of the Plan, a person
who is initially elected to the Board after the adoption of the Plan by the
Board and who is an Independent Director at the time of such initial election
automatically shall be granted (i) an Option to purchase twenty thousand
(20,000) shares of Common Stock (subject to adjustment as provided in Section
10.3) on the date of such initial election and (ii) an Option to purchase five
thousand (5,000) shares of Common Stock (subject to adjustment as provided in
Section 8.3) on the date of each annual meeting of stockholders; provided that
such Independent Director is then serving as a member of the Board and, if
applicable, has been reelected to serve for an additional term as a member of
the Board. Members of the Board who are employees of the Company who
subsequently retire from the Company and remain on the Board will not receive an
initial Option grant pursuant to clause (i) of the preceding sentence, but to
the extent that they are otherwise eligible, will receive, after retirement from
employment with the Company, Options as described in clause (ii) of the
preceding sentence. All the foregoing Option grants authorized by this Section
3.4(d) are subject to stockholder approval of the Plan.
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ARTICLE IV.
TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board in the case of Options granted to Independent Directors)
shall determine, consistent with this Plan. Stock Option Agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may
be necessary to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 422 of the Code.
4.2. Option Price. The price per share of the shares subject to each
Option shall be set by the Committee (or the Board in the case of Options
granted to Independent Directors); provided, however, that:
(a) Unless otherwise permitted by applicable securities laws, such
price shall be not less than eighty-five percent (85%) of the Fair Market
Value of the stock at the time the option is granted, except that the price
shall be one hundred and ten percent (110%) of the Fair Market Value of the
stock in the case of any person possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or
its Subsidiary;
(b) In the case of Incentive Stock Options and Options intended to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the
date the Option is granted; and
(c) In the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary such price shall not be less than
one hundred and ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date the Option is granted.
4.3. Option Term. The term of an Option shall be set by the Committee (or
the Board in the case of Options granted to Independent Directors) in its
discretion; provided, however, that:
(a) No Option may have a term that extends beyond the expiration of
ten (10) years from the date the Option was granted;
(b) In the case of Incentive Stock Options, the term shall not be more
than ten (10) years from the date the Incentive Stock Option is granted, or
five (5) years from such date if the Incentive Stock Option is granted to
an individual then owning (within the meaning of Section 424(d) of the
Code) more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary;
(c) Except as limited by requirements of Section 422 of the Code and
regulations and rulings thereunder applicable to Incentive Stock Options,
the Committee (or the Board in the case of Options granted to Independent
Directors) may extend the term of any outstanding Option in connection with
any Termination of Directorship, Termination of Employment or Termination
of Consultancy of the Optionee, or amend any other term or condition of
such Option relating to such a termination.
4.4. Option Vesting.
(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee (or the Board in the
case of Options granted to Independent Directors) and the Committee (or the
Board in the case of Options granted to Independent Directors) may determine
that an Option may not be exercised in whole or in part for a specified period
after it is granted; provided, however, that, unless the Committee otherwise
provides in the terms of the Option or otherwise, no Option shall be exercisable
by any Optionee who is then subject to Section 16 of the Exchange Act within the
period ending
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six (6) months and one day after the date the Option is granted; and provided,
further, that Options granted to Independent Directors shall become exercisable
in cumulative annual installments of 25% on each of the first, second, third,
and fourth anniversaries of the date of the Option grant, without variation or
acceleration hereunder except as provided in section 8.3. At any time after the
grant of an Option, the Committee may, in its sole and absolute discretion and
subject to whatever terms and conditions it selects, accelerate the period
during which an Option (except an Option granted to an Independent Director)
vests.
(b) No portion of an Option which is unexercisable at Termination of
Directorship, Termination of Employment or Termination of Consultancy shall
thereafter become exercisable, except as may be otherwise provided by the
Committee (or the Board in the case of Options granted to Independent Directors)
either in the Stock Option Agreement or by action of the Committee (or the Board
in the case of Options granted to Independent Directors) following the grant of
the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5. Consideration. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ (or to consult for or serve as an Independent Director, as applicable) of
the Company or any Subsidiary for a period of at least one (1) year (or such
shorter period as may be fixed in the Stock Option Agreement or by action of the
Committee (or the Board in the case of Options granted to Independent Directors)
following grant of the Option) after the Option is granted (or, in the case of
an Independent Director, until the next annual meeting of the stockholders of
the Company). Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ (or to
consult for or serve as an Independent Director, as applicable) of the Company
or any Subsidiary or shall interfere with or restrict in any way the rights of
the Company or any Subsidiary, which are hereby expressly reserved, to discharge
any Optionee at any time for any reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares, and the Committee (or the Board in the case of Options granted to
Independent Directors) may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
5.2. Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or such Secretary's office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board in the case of Options granted to
Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee (or the Board
in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee (or the Board in the case of
Options granted to Independent Directors) may, in its absolute discretion,
also take whatever additional actions it deems appropriate to
B-7
<PAGE> 38
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 8.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
and for payment of any applicable withholding or other applicable
employment taxes with respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board in the case of Options
granted to Independent Directors), may in its discretion (i) allow a delay
in payment up to thirty (30) days from the date the Option, or portion
thereof, is exercised; (ii) allow payment, in whole or in part, through the
delivery of shares of Common Stock owned by the Optionee, duly endorsed for
transfer to the Company with a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iii) allow payment, in whole or in part, through the surrender of
shares of Common Stock then issuable upon exercise of the Option having a
Fair Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof; (iv) allow
payment, in whole or in part, through the delivery of property of any kind
which constitutes good and valuable consideration; (v) allow payment, in
whole or in part, through the delivery of a full recourse promissory note
bearing interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as may
be prescribed by the Committee (or the Board in the case of Options granted
to Independent Directors); (vi) allow payment, in whole or in part, through
the delivery of a notice that the Optionee has placed a market sell order
with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price and any applicable withholding or
other employment taxes; or (vii) allow payment through any combination of
the consideration provided in the foregoing subparagraphs (ii), (iii),
(iv), (v) and (vi). In the case of a promissory note, the Committee (or the
Board in the case of Options granted to Independent Directors) may also
prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note
or by a loan from the Company when or where such loan or other extension of
credit is prohibited by law.
5.3. Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges, if
any, on which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee or the Board shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee or the Board shall, in its
absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee or the Board may establish from time to time
for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
B-8
<PAGE> 39
5.4. Rights as Stockholders. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
ARTICLE VI.
RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES
6.1. Ownership and Transfer Restrictions. The Committee (or Board, in the
case of Options granted to Independent Directors), in its absolute discretion,
may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two (2) years from the date of granting such Option to such Employee or (ii)
one year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
6.2. Limitation on Exercise of Options Granted to Independent Directors. No
Option granted to an Independent Director may be exercised to any extent by
anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) The expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of section 22(e)(3) of the Code);
(c) The expiration of three (3) months from the date of the Optionee's
Termination of Directorship for any reason other than such Optionee's death
or his permanent and total disability, unless the Optionee dies within said
three month period; or
(d) The expiration of ten (10) years from the date the Option was
granted.
ARTICLE VII.
ADMINISTRATION
7.1. Compensation Committee. The Compensation Committee (or another
committee of the Board assuming the functions of the Committee under this Plan)
shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
"non-employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
7.2. Duties and Powers of Committee. It shall be the duty of the Committee
to conduct the general administration of this Plan in accordance with its
provisions. The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options are granted or awarded, and to adopt such
rules for the administration, interpretation, and application of this Plan as
are consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
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<PAGE> 40
7.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.
7.4. Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Options, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
8.1. Not Transferable. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such options have been
exercised, or the shares underlying such Options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or the Optionee's successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee, only such Optionee may exercise an
Option (or any portion thereof) granted to such Optionee under the Plan, unless
the Option has been disposed of pursuant to a QDRO. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement or other agreement, be exercised by the Optionee's personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
8.2. Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 8.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 8.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, alter or impair any rights or obligations
under any Options theretofore granted or awarded, unless the award itself
otherwise expressly so provides. No Options may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:
(a) The expiration of ten (10) years from the date the Plan is adopted
by the Board; or
(b) The expiration of ten (10) years from the date the Plan is
approved by the Company's stockholders under Section 8.4.
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<PAGE> 41
8.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 8.3(d), in the event that the Committee (or the
Board in the case of Options granted to Independent Directors) determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company (including,
but not limited to, a Corporate Transaction), or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or, in the
case of Options granted to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by the Committee
(or the Board in the case of Options granted to Independent Directors) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Option, then the Committee (or the Board in the case of Options granted to
Independent Directors) shall, in such manner as it may deem equitable, adjust
any or all of:
(i) the number and kind of shares of Common Stock (or other securities
or property) with respect to which Options may be granted under the Plan,
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Sections 8.3(b)(vi) and 8.3(d), in the event of any
Corporate Transaction or other transaction or event described in Section 8.3(a)
or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one
(1) or more of the following actions whenever the Committee (or the Board in the
case of Options granted to Independent Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any option under this Plan, to facilitate such transactions or events or to
give effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the case
of Options granted to Independent Directors) may provide, either by the
terms of the agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Optionee's
request, for either the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
Option, or realization of the Optionee's rights had such Option been
currently exercisable or payable or fully vested or the replacement of such
Option with other rights or property selected by the Committee (or the
Board in the case of Options granted to Independent Directors) in its sole
discretion;
(ii) In its sole and absolute discretion, the Committee (or the Board
in the case of Options granted to Independent Directors) may provide,
either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after
such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the case
of Options granted to Independent Directors) may provide, either by the
terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to
B-11
<PAGE> 42
all shares covered thereby, notwithstanding anything to the contrary in (i)
Section 4.4 or (ii) the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the case
of Options granted to Independent Directors) may provide, either by the
terms of such Option or by action taken prior to the occurrence of such
transaction or event, that upon such event, such Option be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the case
of Options granted to Independent Directors) may make adjustments in the
number and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding Options and Options which may be granted in the future; and
(vi) None of the foregoing discretionary actions taken under this
Section 8.3(b) shall be permitted with respect to Options granted to
Independent Directors to the extent that such discretion would be
inconsistent with the applicable exemptive conditions of Rule 16b-3. In the
event of a Corporate Transaction, to the extent that the Board does not
have the ability under Rule 16b-3 to take or to refrain from taking the
discretionary actions set forth in Section 8.3(b)(iii) above, each Option
granted to an Independent Director shall be exercisable as to all shares
covered thereby during the five days immediately preceding the consummation
of such Corporate Transaction and subject to such consummation,
notwithstanding anything to the contrary in Section 4.4 or the vesting
schedule of such Options. In the event of a Corporate Transaction, to the
extent that the Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth in Section
8.3(b)(ii) above, no Option granted to an Independent Director may be
exercised following such Corporate Transaction unless such Option is, in
connection with such Corporate Transaction, either assumed by the successor
or survivor corporation (or parent or subsidiary thereof) or replaced with
a comparable right with respect to shares of the capital stock of the
successor or survivor corporation (or parent or subsidiary thereof).
(c) Subject to Section 8.3(d) and 8.8, the Committee (or the Board in the
case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option as it may deem
equitable and in the best interests of the Company.
(d) With respect to Incentive Stock Options and Options intended to qualify
as performance-based compensation under Section 162(m), no adjustment or action
described in this Section 8.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such option to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee (or the Board in the case of Options granted to Independent Directors)
determines that the Option is not to comply with such exemptive conditions. The
number of shares of Common Stock subject to any Option shall always be rounded
to the next whole number.
8.4. Approval of Plan by Stockholders. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of this Plan. Options may be granted prior to such
stockholder approval, provided that such Options shall not be exercisable prior
to the time when this Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said twelve-month
period, all Options previously granted under this Plan shall thereupon be
canceled and become null and void.
B-12
<PAGE> 43
8.5. Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option. The Committee (or the Board in the
case of Options granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee to elect to have
the Company withhold shares of Common Stock otherwise issuable under such Option
(or allow the return of shares of Common Stock) having a Fair Market Value equal
to the sums required to be withheld.
8.6. Loans. The Committee may, in its discretion, extend one (1) or more
loans to key Employees in connection with the exercise or receipt of an Option
granted under this Plan. The terms and conditions of any such loan shall be set
by the Committee.
8.7. Forfeiture Provisions. Pursuant to its general authority to determine
the terms and conditions applicable to awards under the Plan, the Committee (or
the Board in the case of Options granted to Independent Directors) shall have
the right (to the extent consistent with the applicable exemptive conditions of
Rule 16b-3 and to the extent permitted under applicable state law) to provide,
in the terms of Options made under the Plan, or to require the recipient to
agree by separate written instrument, that (i) any proceeds, gains or other
economic benefit actually or constructively received by the recipient upon any
receipt or exercise of an Option, or upon the receipt or resale of any Common
Stock underlying such Option, must be paid to the Company, and (ii) the Option
shall terminate and any unexercised portion of such Option (whether or not
vested) shall be forfeited, if (a) a Termination of Directorship, Termination of
Employment or Termination of Consultancy occurs prior to a specified date, or
within a specified time period following receipt or exercise of the Option, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).
8.8. Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan, and
any Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Options granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section 162(m)
of the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
8.9. Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, directors or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
8.10. Compliance with Laws. This Plan, the granting and vesting of Options
under this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Options granted hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be
B-13
<PAGE> 44
subject to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law,
the Plan and Options granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
8.11. Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.
8.12. Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
B-14
<PAGE> 45
[FRONT OF PROXY CARD]
The undersigned stockholder(s) of InterVU Inc. (the "Company") hereby
constitutes and appoints Harry E. Gruber and Kenneth L. Ruggiero, and each of
them, attorneys and proxies of the undersigned, each with power of substitution,
to attend, vote and act for the undersigned at the Annual Meeting of
Stockholders of the Company to be held on June 22, 1998, and at any adjournment
or postponement thereof, according to the number of shares of Common Stock or
Series G Convertible Preferred Stock of the Company which the undersigned may be
entitled to vote, and with all powers which the undersigned would possess if
personally present, as follows:
<TABLE>
<S> <C> <C>
1. TO ELECT TWO DIRECTORS ___ FOR all nominees ___ WITHHOLD AUTHORITY
FOR A THREE-YEAR TERM TO listed below (except to vote for all
EXPIRE AT THE 2001 ANNUAL as marked to the nominees listed below
MEETING OF STOCKHOLDERS: contrary below)
</TABLE>
Mark Dowley
Isaac Willis
(INSTRUCTION: To vote for all nominees listed above, mark the "FOR" box; to
withhold authority for all nominees listed above, mark the "WITHHOLD AUTHORITY"
box; and to withhold authority to vote for any individual nominee listed above,
mark the "FOR" box and write the nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTOR OF ALL NOMINEES SET
FORTH IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, UNLESS THE CONTRARY
IS INDICATED IN THE APPROPRIATE PLACE.
2. TO APPROVE THE ADOPTION OF THE EMPLOYEE QUALIFIED STOCK PURCHASE PLAN AND
THE RESERVATION OF 500,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
FOR ______ AGAINST ______ ABSTAIN ______
THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THE ADOPTION OF THE QUALIFIED STOCK
PURCHASE PLAN AS DESCRIBED IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT,
UNLESS THE CONTRARY IS INDICATED IN THE APPROPRIATE PLACE.
3. TO APPROVE THE ADOPTION OF THE 1998 STOCK OPTION PLAN AND THE RESERVATION OF
2,000,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
FOR ______ AGAINST ______ ABSTAIN ______
THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THE ADOPTION OF THE 1998 STOCK
OPTION PLAN AS DESCRIBED IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT,
UNLESS THE CONTRARY IS INDICATED IN THE APPROPRIATE PLACE.
(Continued on reverse side)
<PAGE> 46
[REVERSE OF PROXY CARD]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned revokes any prior proxy at such meeting and ratifies all
that said attorneys and proxies, or any of them, may lawfully do by virtue
hereof. Receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement is hereby acknowledged.
Dated: , 1998
-----------------
--------------------------------------------------
--------------------------------------------------
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(Signature(s) of stockholders) Please sign exactly
as name appears herein. When shares are held by
joint tenants, both should sign; when signing as
an attorney, executor, administrator, trustee or
guardian, give full title as such. If a
corporation, sign in full corporate name by
President or other authorized officer. If a
partnership, sign in partnership name by
authorized partner.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERVU INC.
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENVELOPE
ENCLOSED
