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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DTM CORPORATION
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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April 30, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
DTM Corporation, which will be held at the Doubletree Hotel Austin, 6505 IH-35
North, Austin, Texas on Tuesday, May 25, 1999 at 9:00 a.m. (Central Daylight
Time).
Details of the business to be conducted at the annual meeting are given in the
attached Notice of Annual Meeting of Shareholders and Proxy Statement.
After careful consideration, the Company's Board of Directors has unanimously
approved the proposals set forth in the Proxy Statement and recommends that you
vote in favor of each such proposal and for each of the directors nominated for
election to the Company's Board of Directors.
In order for us to have an efficient meeting, please sign, date and return the
enclosed proxy promptly in the accompanying reply envelope. If you are able to
attend the annual meeting and wish to change your proxy vote, you may do so
simply by voting in person at the annual meeting.
We look forward to seeing you at the meeting.
Sincerely,
/s/ JOHN S. MURCHISON, III
John S. Murchison, III
President and Chief Executive Officer
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YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you
are requested to complete, sign and date the enclosed proxy
as promptly as possible and return it in the enclosed
envelope. No postage needs to be affixed if mailed in the
United States.
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[LETTERHEAD OF DTM CORPORATION]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 1999
TO THE SHAREHOLDERS OF DTM CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of DTM
Corporation, a Texas corporation (the "Company"), will be held on Tuesday, May
25, 1999, at 9:00 a.m. (Central Daylight Time) at the Doubletree Hotel Austin,
6505 IH-35 North, Austin, Texas, for the following purposes, as more fully
described in the Proxy Statement accompanying this Notice:
1. To elect five (5) directors to the Company's Board of Directors to
serve until the next annual meeting of the Company's Board of
Directors or until their respective successors are duly elected and
qualified;
2. To approve the adoption of the Company's 1999 Stock Incentive Plan;
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1999; and
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on April 23, 1999 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books of the Company will remain open between the record date and the date of
the meeting. A list of shareholders entitled to vote at the Annual Meeting will
be available for inspection at the executive offices of the Company.
All shareholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
/s/ GEOFFREY W. KREIGER
Geoffrey W. Kreiger
Secretary
Austin, Texas
April 30, 1999
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, AND RETURN IT IN THE ENCLOSED
ENVELOPE.
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[LETTER HEAD 0F DTM CORPORATION]
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 25, 1999
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GENERAL
The enclosed proxy (the "Proxy") is solicited on behalf of the Board of
Directors (the "Board") of DTM Corporation, a Texas corporation (the "Company"),
for use at the Annual Meeting of Shareholders to be held on Tuesday, May 25,
1999 (the "Annual Meeting"). The Annual Meeting will be held at 9:00 a.m.
(Central Daylight Time) at the Doubletree Hotel Austin, 6505 IH-35 North,
Austin, Texas. These proxy solicitation materials were mailed on or about April
30, 1999, to all shareholders entitled to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. On April 23, 1999, the record date for
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, 6,621,336 shares of the Company's common stock, par value $0.0002 per
share ("Common Stock"), were issued and outstanding. No shares of the Company's
preferred stock, par value $0.001 per share, were issued and outstanding. Each
shareholder is entitled to one vote for each share of Common Stock held by such
shareholder on April 23, 1999. Shareholders may not cumulate votes in the
election of directors.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
as present for purposes of determining the presence or absence of a quorum for
the transaction of business. In the election of directors, the five candidates
receiving the highest number of affirmative votes will be elected. Proposals Two
and Three each require for approval the affirmative vote of a majority of those
shares entitled to vote, and that voted for or against or expressly abstained
with respect to, that matter. Therefore, abstentions will be counted towards the
tabulations of votes cast on proposals presented to the shareholders and will
have the same effect as negative votes, whereas broker non-votes will not be
counted for purposes of determining whether a proposal has been approved.
PRINCIPAL HOLDERS OF SECURITIES
On February 12, 1999, pursuant to the transactions contemplated by a stock
purchase agreement (the "Agreement") between Proactive Finance Group, LLC
("Proactive"), and The B.F.Goodrich Company ("BFGoodrich"), Proactive purchased
from BFGoodrich, for an aggregate purchase price of $3.5 million, all of the
3,157,190 shares of the Company's Common Stock, or 47.7% interest in the
Company, held by BFGoodrich, as well as all right, title and interest in a
$909,000 receivable due to BFGoodrich by the Company. Proactive
contemporaneously assigned its rights under the Agreement to DTM Acquisition
Company, L.P. ("DTMAC"), an affiliated investment partnership of independent
investors.
As a condition to the closing of the transactions contemplated by the
Agreement, the BFGoodrich executives who were members of the Company's Board of
Directors, Les C. Vinney, Robert D. Koney, Jr., and Marshall O. Larsen,
resigned. Three persons affiliated with Proactive, Lawrence Goldstein, Anthony
Mariotti and Samuel A. Myers, were appointed to fill the resulting Board
vacancies. Mr. Myers subsequently resigned from the Board of Directors and
James B. Skaggs was appointed by the Board of Directors to fill the resulting
vacancy.
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PROXIES
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted "FOR" the election
of each director proposed by the Board unless the authority to vote for the
election of such director is withheld and, if no contrary instructions are
given, the proxy will be voted "FOR" the approval of Proposals Two and Three
described in the accompanying Notice and Proxy Statement. You may revoke or
change your Proxy at any time before the Annual Meeting by filing with the
Secretary of the Company at the Company's principal executive offices at 1611
Headway Circle, Building Two, Austin, Texas 78754, a notice of revocation or
another signed Proxy with a later date. You may also revoke your Proxy by
attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to the shareholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram or other means by directors, officers or employees of the
Company. No additional compensation will be paid to these individuals for any
such services. Except as described above, the Company does not presently intend
to solicit proxies other than by mail.
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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
Five directors are proposed to be elected at the Annual Meeting, all of
whom currently are directors of the Company. Each director will serve until the
next annual meeting of shareholders or until his successor is duly elected and
qualified. The Bylaws provide for a Board of Directors of not less than three
directors, with the number of directors that shall constitute the Board of
Directors being determined from time to time by resolution of the Board of
Directors (provided that no decrease in the number of directors that would have
the effect of shortening the term of an incumbent director may be made by the
Board of Directors). Furthermore, the Bylaws provide that vacancies on the
Board of Directors may be filled by election at an annual or special meeting of
the shareholders called for such purpose or by the affirmative vote of a
majority of the remaining directors though not a quorum. The number of
directors on the Company's Board of Directors shall be set at five upon the
expiration of the term of Alexander MacLachlan, one of the Company's directors,
who has asked not to be reconsidered for election.
The nominees for election each have agreed to serve if elected, and
management has no reason to believe that such nominee will be unavailable to
serve. The persons named in the accompanying proxy may act with discretionary
authority to vote for a new management nominee should any nominee named in this
Proxy Statement become unavailable for election, although management is unaware
of any circumstances likely to render any nominee unavailable for election.
Unless otherwise instructed, the proxy holders will vote the Proxies received by
them FOR the nominees named below.
The Amended and Restated Articles of Incorporation of the Company do not
permit cumulative voting. A plurality of the votes of the holders of the
outstanding shares of Common Stock of the Company represented at the Annual
Meeting at which a quorum is present will elect all five directors.
NOMINEES FOR DIRECTOR
The following table sets forth the name, age (as of April 30, 1999) and
current position with the Company of each person who is a nominee for election
as a director of the Company.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
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<S> <C> <C>
Lawrence Goldstein 36 1999
Anthony Mariotti 38 1999
John S. Murchison, III 57 1996
Thomas G. Ricks 46 1988
James B. Skaggs 61 1999
</TABLE>
LAWRENCE GOLDSTEIN has served as a Director of the Company since February
1999. Mr. Goldstein joined Seed Capital Partners, a venture capital firm, as
Vice President in May 1994 and assumed the position of President in July 1998.
In addition, he has been a principal of Proactive Finance Group, LLC since its
inception in August 1997. Mr. Goldstein serves as a member of the Compensation
Committee of the Board of Directors.
ANTHONY MARIOTTI has served as a Director of the Company since February
1999. Since August 1997, Mr. Mariotti has served as the Managing Member of
Proactive Finance Group, LLC. Prior to that, he served as the interim Chief
Financial Officer and Chief Operating Officer of Skipstone, Inc. from April 1996
until July 1997. From August 1991 until April 1996, Mr. Mariotti was an
independent financing and business advisor. Mr. Mariotti serves as a member of
the Compensation Committee of the Board of Directors.
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JOHN S. MURCHISON, III joined the Company as Chief Executive Officer and
President in September 1990. He was a Director of the Company from September
1990 through September 1993 and currently serves as a Director, having been
again elected as a member of the Board of Directors in March 1996.
THOMAS G. RICKS has served as a Director of the Company since May 1988.
From August 1991 to March 1996, Mr. Ricks served as Chairman of the Board of the
Company. Since March 1996, he has served as President and Chief Executive
Officer of The University of Texas Investment Management Company, a non-profit
corporation engaged exclusively in providing investment management services to
the Board of Regents of the University of Texas, a minority shareholder in the
Company. From August 1992 through February 1996, Mr. Ricks served as Vice
Chancellor-Asset Management of The University of Texas. Mr. Ricks serves as a
member of the Audit Committee of the Board of Directors. Mr. Ricks is also a
director of the Newfield Exploration Company, a publicly-held oil and gas
company engaged in the exploration, development and acquisition of oil and gas
properties located primarily in the Gulf of Mexico.
JAMES B. SKAGGS has served as a Director of the Company since February
1999. In June 1998, Mr. Skaggs retired from Tracor, Inc., a publicly-held
defense electronics and information systems company, where he had served as
President, Chief Executive Officer and Chairman of the Board since March 1990.
Mr. Skaggs serves as a member of the Audit and Compensation Committees of the
Board of Directors. Mr. Skaggs is also a director of Alamo Group Inc., a
publicly-held vegetation maintenance equipment manufacturing company.
RETIRING DIRECTOR
Alexander MacLachlan, a director of the Company since 1996, has asked not
to be reconsidered for election once his term expires at this meeting.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held nine meetings during the fiscal year ended
December 31, 1998 (the "1998 Fiscal Year"). No incumbent director failed to
attend or participate in at least 75% or more of the aggregate of (i) the total
number of meetings of the Board of Directors held during the period for which he
has been a director and (ii) the total number of meetings held by all committees
of the Board on which such director served during the 1998 Fiscal Year.
The Board of Directors has the following standing committees: Audit
Committee and Compensation Committee.
The Audit Committee currently consists of three directors, Messrs.
MacLachlan, Ricks and Skaggs, and is primarily responsible for approving the
services performed by the Company's independent auditors and reviewing their
reports regarding the Company's accounting practices and systems of internal
accounting controls. The Audit Committee held three meetings during the 1998
Fiscal Year.
The Compensation Committee currently consists of three directors, Messrs.
Goldstein, Mariotti and Skaggs, and is primarily responsible for reviewing and
approving the Company's general compensation policies and setting compensation
levels for the Company's executive officers. The Compensation Committee also has
the authority to administer the Company's equity incentive and bonus plans,
including the Company's Equity Appreciation Plan, the Company's 1996 and 1998
Stock Option Plans and the Company's Management Incentive Plan. The Compensation
Committee will also have authority to administer the 1999 Stock Incentive Plan
which is the subject of Proposal Two described herein. The Compensation
Committee held three meetings during the 1998 Fiscal Year.
DIRECTOR COMPENSATION
In March 1996, the Company instituted a program under which its non-
employee, non-affiliated directors are paid an annual retainer of $15,000, a
meeting fee of $1,000 for each board meeting attended and a committee fee of
$800 for each committee meeting attended. The Company permits directors to
defer all or part of their compensation. Non-employee, non-affiliated directors
whose service on the Board of Directors commenced after the 1998 Fiscal Year are
not eligible to receive compensation under this program. Accordingly, the only
directors
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who are eligible to receive compensation are Messrs. Ricks and MacLachlan. Mr.
Ricks' compensation is payable to The University of Texas Investment Management
Company. Mr. Ricks' fees have been accumulated but pursuant to Mr. Ricks'
request have not been paid. Mr. Ricks reserves the right to request payment of
these deferred fees at any time, although he has informed the Company that he
has no present intention to make such a payment request.
Assuming approval by the shareholders of the Company's 1999 Stock Incentive
Plan pursuant to Proposal Two, non-employee Board members will receive option
grants at periodic intervals under the Automatic Option Grant Program of that
plan and will also be eligible to receive discretionary option grants under the
Discretionary Option Grant Program of such plan.
Under the Automatic Option Grant Program of the 1999 Stock Incentive Plan,
each individual serving as a Board member on the date of the Annual Meeting will
receive an option to purchase 24,000 shares of Common Stock. Each individual
who first becomes a non-employee Board member, whether through appointment by
the Board or upon election by the shareholders, on or after the date of the
Annual Meeting, will receive an option to purchase 24,000 shares of Common Stock
at the time of his or her initial appointment or election, provided such
individual has not otherwise been in the prior employ of the Company. In
addition, at each Annual Shareholders Meeting, beginning with the 2000 Annual
Meeting, each individual who is to continue to serve as a non-employee Board
member will receive an option grant for 5,000 shares of Common Stock, whether or
not such individual has been in the prior employ of the Company.
Each automatic option grant will have an exercise price per share equal to
the fair market value per share of Common Stock on the grant date and will have
a maximum term of 10 years, subject to earlier termination following the
optionee's cessation of Board service. Each automatic option will be
immediately exercisable for all of the option shares; however, any shares
purchased upon exercise of the option will be subject to repurchase, at the
option exercise price paid per share, should the optionee's service as a non-
employee Board member cease prior to vesting in those shares. The shares
subject to each 24,000-share grant will vest in three equal annual installments
over the optionee's period of Board service, with the first such installment to
vest upon the optionee's completion of one year of Board service measured from
the option grant date. The shares subject to each annual 5,000-share grant will
vest upon the optionee's completion of one year of Board service measured from
the grant date. See the summary of the Automatic Option Grant Program in
Proposal Two of this Proxy Statement for further information concerning the
terms and conditions of these automatic option grants.
Messrs. Goldstein and Mariotti have informed the Company that they intend
to waive their rights to receive option grants under the 1999 Stock Incentive
Plan or any other director compensation for so long as DTMAC holds at least a
20% interest in the Company. Mr. Ricks has also informed the Company that he
intends to waive his right to receive option grants under the 1999 Stock
Incentive Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS REGARDING PROPOSAL ONE
THE BOARD BELIEVES THAT THE ELECTION OF THE PERSONS LISTED ABOVE AS
DIRECTORS OF THE COMPANY IS IN THE BEST INTEREST OF THE COMPANY AND ITS
SHAREHOLDERS. THE BOARD OF DIRECTORS THEREFORE RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
PROPOSAL TWO: APPROVAL OF 1999 STOCK INCENTIVE PLAN
The Company's shareholders are being asked to approve the 1999 Stock
Incentive Plan (the "1999 Incentive Plan"), to serve as the successor to the
Company's existing 1996 Stock Option Plan and 1998 Stock Option Plan (together,
the "Predecessor Plans"). The 1999 Incentive Plan will become effective
immediately upon shareholder approval at the 1999 Annual Meeting, and all
outstanding options under the Predecessor Plans will be incorporated into the
1999 Incentive Plan at that time. The Predecessor Plans will terminate, and no
further option grants, stock appreciation rights or other share awards will be
made under the Predecessor Plans. However, all outstanding options under the
Predecessor Plans will continue to be governed by the terms and conditions of
the existing option agreements for those grants except to the extent the Board
or Compensation Committee elects to extend one or more features of the 1999
Incentive Plan to those options.
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The 1999 Incentive Plan was adopted by the Board on March 17, 1999 and is
designed to serve as a comprehensive equity incentive program to attract and
retain the services of individuals essential to the Company's long-term growth
and financial success. Accordingly, officers and other key employees, non-
employee Board members and consultants and other advisors in the service of the
Company or any subsidiary corporation will have the opportunity to acquire a
meaningful equity interest in the Company through their participation in the
1999 Incentive Plan.
The following is a summary of the principal features of the 1999 Incentive
Plan. The summary, however, does not purport to be a complete description of
all the provisions of the 1999 Incentive Plan. Any shareholder of the Company
who wishes to obtain a copy of the actual plan document may do so upon written
request to the Corporate Secretary at the Company's principal executive offices
in Austin, Texas.
EQUITY INCENTIVE PROGRAMS
The 1999 Incentive Plan contains three separate equity incentive programs:
(i) a Discretionary Option Grant Program; (ii) an Automatic Option Grant
Program; and (iii) a Stock Issuance Program. The principal features of these
programs are described below. The 1999 Incentive Plan (other than the Automatic
Option Grant Program) will be administered by the Compensation Committee of the
Board. This committee (the "Plan Administrator") will have complete discretion
(subject to the provisions of the 1999 Incentive Plan) to authorize option
grants and direct stock issuances under the 1999 Incentive Plan. The Board may
also appoint a secondary committee of one or more Board members, including
employee directors, to authorize option grants and direct stock issuances to
eligible persons other than executive officers and Board members subject to the
short-swing liability provisions of the federal securities laws. All grants
under the Automatic Option Grant Program will be made in strict compliance with
the provisions of that program, and no administrative discretion will be
exercised by the Plan Administrator with respect to the grants made thereunder.
SHARE RESERVE
907,755 shares of Common Stock have been reserved for issuance over the
ten-year term of the 1999 Incentive Plan. The reserve is the number of shares
of Common Stock available for issuance under the Predecessor Plans as of the
date of adoption of the 1999 Incentive Plan by the Board which will be
transferred to the 1999 Incentive Plan (657,755 shares in the aggregate) plus an
increase of 250,000 shares authorized by the Board. In no event may any one
participant in the 1999 Incentive Plan be granted stock options and direct stock
issuances under such Plan for more than 100,000 shares in any one year.
As of March 31, 1999, options for 567,000 shares of Common Stock were
outstanding under the Predecessor Plans and 90,755 shares of Common Stock
remained available for future option grants. In addition, a total of 396,721
shares were outstanding under the Company's Equity Appreciation Plan. The
Equity Appreciation Plan has been terminated and no further grants will be made
under such plan.
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the securities issuable (in the aggregate and to each participant) under
the 1999 Incentive Plan and to the securities and exercise price under each
outstanding option.
ELIGIBILITY
Officers and other employees of the Company and its parent or subsidiaries
(whether now existing or subsequently established), non-employee members of the
Board and the board of directors of its parent or subsidiaries and consultants
and independent advisors of the Company and its parent and subsidiaries will be
eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs. Non-employee members of the Board will also be eligible to
participate in the Automatic Option Grant Program.
As of March 31, 1999, approximately three executive officers, 107 other
employees and four non-employee Board members were eligible to participate in
the 1999 Incentive Plan, and four non-employee Board members were eligible to
participate in the Automatic Option Grant Program. Mr. MacLachlan, one of the
Company's current non-
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employee Board members, will not be eligible to participate since his term
expires at the 1999 Annual Meeting. Messrs. Goldstein and Mariotti, two of the
Company's non-employee Board members, have informed the Company that they intend
to waive their rights to receive option grants under the 1999 Incentive Plan for
so long as DTMAC holds at least a 20% interest in the Company. Mr. Ricks, one of
the Company's non-employee Board members, has also informed the Company that he
intends to waive his right to receive option grants under the 1999 Incentive
Plan.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1999 Incentive Plan will be the closing selling price per share on that date
on the National Market System of The Nasdaq Stock Market. On March 31, 1999,
the closing selling price per share was $1.188.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share not less than the fair market value per share of Common
Stock on the option grant date. No granted option will have a term in excess of
ten years.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator will have the authority to effect the cancellation
of outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Common Stock and
to issue replacement options with an exercise price based on the market price of
Common Stock at the time of the new grant.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who is serving as
a non-employee Board member on the date of the 1999 Annual Meeting will
automatically be granted on that date an option grant for 24,000 shares of
Common Stock, provided such individual has not previously been in the Company's
employ. Each individual who first becomes a non-employee Board member on or
after the date of the Annual Meeting, will automatically be granted at that time
an option grant for 24,000 shares of Common Stock, provided such individual has
not previously been in the Company's employ. In addition, on the date of each
Annual Shareholders Meeting, beginning with the 2000 Annual Meeting, each
individual who is to continue to serve as a non-employee Board member after such
meeting will automatically be granted an option to purchase 5,000 shares of
Common Stock, provided such individual has served as a non-employee Board member
for at least six months. There will be no limit on the number of such 5,000-
share options which any one non-employee Board member may receive over the
period of Board service and non-employee Board members who have previously
served in the Company's employ will be eligible for one or more 5,000-share
option grants.
Each option will have an exercise price per share equal to 100% of the fair
market value per share of Common Stock on the option grant date and a maximum
term of ten years measured from the option grant date. Each option will be
immediately exercisable for all the option shares, but any purchased shares will
be subject to repurchase by the Company, at the exercise price paid per share,
upon the optionee's cessation of Board service. Each initial 24,000-share
option grant will vest (and the Company's repurchase rights will lapse) in three
equal annual installments over the optionee's period of Board service, with the
first such installment to vest upon the optionee's completion of one year of
Board service measured from the option grant date. Each annual 5,000-share
option grant will vest (and the Company's repurchase rights will lapse) upon the
optionee's completion of one year of Board service measured from the option
grant date.
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The shares subject to each automatic option grant will immediately vest
upon the optionee's death or permanent disability or an acquisition of the
Company (whether by merger, asset sale or sale of stock by the shareholders).
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share
not less than the fair market value per share of Common Stock, payable in cash
or through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services or upon attainment of specified performance
goals.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the discretionary
authority at any time to accelerate the vesting of any unvested shares.
GENERAL PROVISIONS
Acceleration
In the event of an acquisition of the Company, whether by merger or asset
sale or a sale by the shareholders of more than 80% of the total combined voting
power of the Company, each outstanding option under the Discretionary Option
Grant Program which is not to be assumed by the successor corporation or
otherwise continued in effect will automatically accelerate in full, and all
unvested shares under the Discretionary Option Grant and Stock Issuance Programs
will immediately vest, except to the extent the Company's repurchase rights with
respect to those shares are to be assigned to the successor corporation or
otherwise continued in effect. The Plan Administrator will have the authority
under the Discretionary Option Grant Program to provide that the shares subject
to options granted under that program will automatically vest (i) upon an
acquisition of the Company, whether or not those options are assumed or
continued, or (ii) in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within a designated
period (not to exceed twelve (12) months) following an acquisition in which
those options are assumed or otherwise continued in effect. The vesting of
outstanding shares under the Stock Issuance Program may be accelerated upon
similar terms and conditions.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Financial Assistance
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options or the purchase price of shares under the
1999 Incentive Plan by delivering a promissory note payable in installments.
The Plan Administrator will determine the terms of any such promissory note.
However, the maximum amount of financing provided any participant may not exceed
the cash consideration payable for the issued shares plus all applicable taxes
incurred in connection with the acquisition of the shares.
Special Tax Election
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the withholding
tax liability incurred by such individuals in connection with the exercise of
those options or the vesting of those shares. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such tax liability.
Amendment and Termination
The Board may amend or modify the 1999 Incentive Plan in any or all
respects whatsoever subject to any required shareholder approval. The Board may
terminate the 1999 Incentive Plan at any time, and the 1999 Incentive Plan will
in all events terminate on March 16, 2009.
8
<PAGE>
STOCK AWARDS
No options have been granted under the 1999 Incentive Plan. The table
below shows, as to each of the Company's executive officers named in the Summary
Compensation Table and the various indicated individuals and groups, the number
of shares of Common Stock subject to options granted between January 1, 1998 and
March 31, 1999 under the Predecessor Plans, together with the weighted average
exercise price payable per shares.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
NAME NUMBER OF OPTION SHARES WEIGHTED AVERAGE EXERCISE PRICE
---- ---------------------- -------------------------------
<S> <C> <C>
John S. Murchison, III
President, Chief Executive Officer and 125,000 $1.563
Director
Kevin McAlea, Ph.D.
Vice President, Marketing 100,000 1.438
Geoffrey W. Kreiger
Chief Financial Officer and Principal 95,000 1.408
Financial and Accounting Officer
All current executive officers as a group
(3 persons) 320,000 1.478
All non-employee directors as a group
(5 persons) -- --
All employees, including current officers who
are not executive officers as a group 190,000 1.605
(116 persons)
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the 1999 Incentive Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories:
(i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
9
<PAGE>
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised non-
statutory option. The deduction will in general be allowed for the taxable year
of the Company in which such ordinary income is recognized by the optionee.
Direct Stock Issuances
The tax principles applicable to direct stock issuances under the 1999
Incentive Plan will be substantially the same as those summarized above for the
exercise of non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered officer
in any fiscal year. The limitation applies only to compensation which is not
considered to be performance-based. Compensation deemed paid by the Company in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory stock options granted under the 1999 Incentive Plan
qualifies as performance-based compensation for purposes of Section 162(m) if
such plan is administered by a committee of "outside directors" as defined under
Section 162(m). However, the 1999 Incentive Plan is currently administered by
the Compensation Committee which comprises Messrs. Goldstein, Mariotti and
Skaggs and, because of Mr. Goldstein's position with, and Mr. Mariotti's
ownership interest in, Proactive and the relationship between the Company and
Proactive as a result of the Financial Advisory Services Agreement entered into
in February 1999, Mr. Goldstein and Mr. Mariotti do not qualify as "outside
directors" for purposes of Section 162(m). Accordingly, compensation deemed
paid by the Company in connection with disqualifying dispositions of incentive
stock option shares or exercises of non-statutory stock options granted under
the 1999 Incentive Plan will have to be taken into account for purposes of the
$1 million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of the Company.
ACCOUNTING TREATMENT
Option grants or stock issuances made to employees under the 1999 Incentive
Plan will not result in any charge to the Company's earnings. However, the
Company must disclose in footnotes and pro-forma statements to the Company's
financial statements, the impact those options would have upon the Company's
reported earnings were the value of those options at the time of grant treated
as a compensation expense. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully-diluted basis.
Under a recently-proposed amendment to the current accounting principles,
option grants made to non-employee Board members or consultants after December
15, 1998 will result in a direct charge to the Company's reported earnings based
upon the fair value of the option measured on the vesting date of each
installment of the underlying option shares. Such charge will accordingly
include the appreciation in the value of the option shares over the period
between the grant date of the option (or, if later, the effective date of the
final amendment) and the vesting date of each installment of the option shares.
In addition, if the proposed amendment is adopted, any options which are
repriced after December 15, 1998 will trigger a direct charge to Company's
reported earnings measured by the appreciation in the value of the underlying
shares over the period between the grant date of the option (or, if later, the
effective date of the final amendment) and the date the option is exercised for
those shares.
10
<PAGE>
NEW PLAN BENEFITS
No options may be granted under the 1999 Incentive Plan until it has been
approved by the shareholders. Assuming such shareholder approval is obtained at
the 1999 Annual Meeting, Mr. Skaggs will receive an option on the date of the
Annual Meeting to purchase 24,000 shares of Common Stock at an exercise price
equal to the fair market value of the Common Stock on that date.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the 1999 Annual Meeting
is required for approval of the 1999 Incentive Plan. Should such shareholder
approval not be obtained, then the 1999 Incentive Plan will not be implemented.
The Company's 1996 Stock Option Plan and 1998 Stock Option Plan will, however,
continue to remain in effect, and option grants may be made pursuant to the
provisions of those plans until the available reserve of Common Stock under each
such plan is issued.
RECOMMENDATION OF THE BOARD OF DIRECTORS REGARDING PROPOSAL TWO
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE 1999 INCENTIVE PLAN.
PROPOSAL THREE: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent public auditors for the Company during the 1998 Fiscal Year, to
serve in the same capacity for the fiscal year ending December 31, 1999, and is
asking the shareholders to ratify this appointment. The affirmative vote of a
majority of the shares represented and voting at the Annual Meeting is required
to ratify the selection of Ernst & Young LLP. Unless otherwise instructed, the
proxy holders will vote the Proxies received by them FOR the ratification of
Ernst & Young LLP as the independent auditors of the Company.
In the event the shareholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its shareholders.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS REGARDING PROPOSAL THREE
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
11
<PAGE>
BENEFICIAL OWNERSHIP OF DTM COMMON STOCK
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
April 23, 1999, by (i) all persons who are beneficial owners of 5% or more of
the Company's Common Stock, (ii) each director and nominee for director, (iii)
the executive officers named in the Summary Compensation Table of the section of
this Proxy Statement entitled "Executive Compensation and Other Information" and
(iv) all current directors and executive officers as a group. Unless otherwise
indicated, each of the shareholders has sole voting and investment power with
respect to the shares beneficially owned, subject to community property laws,
where applicable.
12
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE OF SHARES
BENEFICIAL OWNER OWNED BENEFICIALLY OWNED (1)
----------------- -------------------- -----------------------
<S> <C> <C>
DTM Acquisition Company, L.P. (2) 3,157,190 47.68%
221 West 6th Street, Suite 1520
Austin, Texas 78701 ................................
Lawrence Goldstein (3)............................... -- *
John S. Murchison, III (4)........................... 139,528 2.07
Geoffrey W. Kreiger (5) ........................... 7,000 *
Alexander MacLachlan................................. 1,000 *
Anthony Mariotti (6)................................. 3,157,190 47.68
Kevin McAlea, Ph.D. (7).............................. 34,957 *
Thomas G. Ricks...................................... -- *
James B. Skaggs (8).................................. -- *
All current directors and executive officers as a
group (8 persons) (9)........................... 3,339,675 49.12%
</TABLE>
_____________
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to stock options which are currently exercisable or will become
exercisable within 60 days after April 23, 1999 are deemed outstanding for
computing the percentage of the person or group holding such options, but
are not deemed outstanding for computing the percentage of any other person
or group.
(2) Based on Schedule 13D/A of Proactive as filed with the Securities and
Exchange Commission on February 26, 1999.
(3) Mr. Goldstein is a limited partner in Proactive-DTM, L.P. ("Pro-DTM"),
which is the general partner of DTM Acquisition Company, L.P. ("DTMAC").
Mr. Goldstein is also a limited partner in DTMAC. Mr. Goldstein disclaims
beneficial ownership of the shares held by DTMAC.
(4) Includes 135,528 shares of Common Stock issuable upon the exercise of
option grants which will become exercisable within 60 days after April 23,
1999.
(5) Represents 7,000 shares of Common Stock issuable upon the exercise of
option grants which will become exercisable within 60 days after April 23,
1999.
(6) Includes only shares owned by DTMAC. Mr. Mariotti is the managing member
of Proactive, which is the general partner of Pro-DTM, which is the general
partner of DTMAC. Mr. Mariotti is also a limited partner in Pro-DTM and
DTMAC. Mr. Mariotti disclaims beneficial ownership of the shares held by
DTMAC, except to the extent of his pecuniary interest in them arising from
his ownership interests in Proactive, Pro-DTM and DTMAC. Mr. Mariotti's
address is c/o Proactive Finance Group, LLC, 221 West 6th Street, Suite
1520, Austin, Texas 78701.
(7) Represents 34,957 shares of Common Stock issuable upon the exercise of
option grants which will become exercisable within 60 days after April 23,
1999.
(8) Mr. Skaggs is a limited partner in DTMAC. Mr. Skaggs disclaims beneficial
ownership of the shares held by DTMAC.
(9) Includes 3,157,190 shares owned by DTMAC, of which Messrs. Goldstein,
Mariotti and Skaggs each disclaims beneficial ownership. Also includes
177,485 shares issuable upon the exercise of stock options which will
become exercisable within 60 days after April 23, 1999.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and each of the two
other most highly compensated executive officers of the Company whose annual
salary and bonus for the 1998 Fiscal Year was in excess of $100,000 for services
rendered in all capacities to the Company and its subsidiaries for the fiscal
years ended December 31, 1996, 1997 and 1998. No other executive officer who
would have otherwise been includable in such table on the basis of salary and
bonus earned for the 1998 Fiscal Year has been excluded by reason of his or her
termination of employment or change in executive status during that year. The
listed individuals shall be hereinafter referred to as the "Named Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
-----------------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/SARs
POSITION YEAR SALARY BONUS COMPENSATION (1)
- ---------------------- ------------ -------------- -------- --------------- --------------
<S> <C> <C> <C> <C> <C>
John S. Murchison, III 1998 $170,000 -- -- 50,000
President and Chief 1997 157,500 -- -- 25,000
Executive Officer 1996 150,000 -- -- --
Kevin McAlea, Ph.D. 1998 135,000 -- -- 25,000
Vice President, Marketing 1997 105,833 -- -- 15,000
1996 92,700 -- -- --
Geoffrey W. Kreiger (2) 1998 90,000 -- -- 20,000
Chief Financial Officer 1997 938 -- -- --
and Principal Financial 1996 -- -- -- --
and Accounting Officer
</TABLE>
______________
(1) Consists of stock options under the 1996 and 1998 Stock Option Plans.
(2) Mr. Kreiger commenced employment with the Company in December 1997.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the stock options
granted to the Named Officers during the 1998 Fiscal Year. The stock option
grants were made under the Company's 1996 Stock Option Plan or 1998 Stock Option
Plan, as indicated. No stock appreciation rights were granted to the Named
Officers during the 1998 Fiscal Year.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSURED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
---------------------------------------------------------------------------------- -----------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES Granted to MARKET
Underlying EMPLOYEES EXERCISE OR PRICE ON
OPTIONS IN FISCAL BASE PRICE DATE OF EXPIRATION
NAME GRANTED (#) YEAR ($/SH)(2) GRANT DATE 5% ($) 10% ($)
- ---------------------- ----------------- -------------- ------------- ----------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
John S. Murchison, III 25,000(3) 13.77% $2.00 $2.00 01/13/08 $31,500 $79,750
25,000(4) 13.77% 2.06 2.06 05/13/08 32,500 82,000
Kevin McAlea, Ph.D. 25,000(3) 13.77% 2.00 2.00 01/13/08 31,500 79,750
Geoffrey W. Kreiger 20,000(3) 11.02% 2.00 2.00 01/13/08 31,500 79,750
</TABLE>
__________________
(1) There can be no assurance provided to any executive officer or other holder
of the Company's securities that the actual stock price appreciation over
the ten-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from those
option grants which were made to the Named Officers with an exercise price
equal to the fair market value of the option shares on the grant date.
(2) The exercise price may be paid in cash or in shares of Common Stock valued
at fair market value on the exercise date or in any other manner authorized
by the Plan Administrator of the 1996 Stock Option Plan and the 1998 Stock
Option Plan, as the case may be, pursuant to which the options were
granted.
(3) Each option under the 1996 Stock Option Plan becomes exercisable for 35% of
the shares upon the optionee's completion of one year of service measured
from the grant date, 35% of the shares upon the second anniversary of such
grant date and the remaining 30% of the shares on the third anniversary of
such grant date. In the event of certain changes in the ownership or
control of the Company pursuant to which the holders of the Company's
outstanding securities immediately prior to such transaction do not control
more than 70% of the successor corporation's outstanding voting securities
following such transaction or in the event that, over a period of two
years, there is a change in the majority of the Board by reason of one or
more proxy contests for the election of Board members, the option will
automatically accelerate and become exercisable in full. However, a change
in control shall not be deemed to occur for this purpose if, immediately
prior to any of the above transactions (or the two-year period applicable
in connection with a change in control of the Board), BFGoodrich or any of
its affiliates is the beneficial owner of shares of the Company. In
addition, a sale of shares by BFGoodrich or any other individual or entity
who was a shareholder of the Company on the date on which the 1996 Stock
Option Plan was adopted shall not constitute a change in control for this
purpose.
(4) Each option under the 1998 Stock Option Plan becomes exercisable for 35% of
the shares upon the optionee's completion of one year of service measured
from the grant date, 35% of the shares upon the second anniversary of such
grant date and the remaining 30% of the shares on the third anniversary of
such grant date. In the event of certain changes in the ownership or
control of the Company pursuant to which the holders of the Company's
outstanding securities immediately prior to such transaction do not control
more than 70% of the successor corporation's outstanding voting securities
following such transaction or in the event that, over a period of two
years, there is a change in the majority of the Board by reason of one or
more proxy contests for the election of Board members, the option will
automatically accelerate and become exercisable in full except to the
extent such option is to be assumed by the successor entity or otherwise
continued in effect. Should the optionee's service be terminated, whether
by the Company other than for cause or pursuant to a resignation by the
optionee for good reason, within eighteen (18) months following a change in
ownership or control of the Company in which such option does not otherwise
accelerate, the option shall become exercisable in full.
In addition to the options listed above, on March 17, 1999, each of Messrs.
Murchison, McAlea and Kreiger were granted options under the 1996 Stock Option
Plan and the 1998 Stock Option Plan to purchase an aggregate 75,000 shares of
Common Stock (25,000 under the 1996 Stock Option Plan, 50,000 under the 1998
Stock Option Plan) at an exercise price of $1.25 per share, the fair market
value per share of Common Stock on that date. Each of these options becomes
exercisable with respect to thirty-five percent (35%) of the option shares on
each of the first and second anniversaries of the option grant date and the
remaining thirty percent (30%) on the third
15
<PAGE>
anniversary of such date. In the event of an acquisition of the Company by
merger or asset sale or a sale by the shareholders of more than 80% of the total
combined voting power of the Company, each such option shall accelerate in full
except to the extent assumed by the successor entity or otherwise continued in
effect. Should the optionee's service be terminated, whether by the Company
other than for cause or pursuant to a resignation by the optionee in response to
certain job reassignments or compensation reductions that could be deemed an
effective termination without cause, within twelve (12) months following a
change in ownership or control of the Company in which such option does not
otherwise accelerate, the option shall become exercisable in full.
AGGREGATED OPTION\SAR EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information, with respect to the Named
Officers, concerning the unexercised options held by them at of the end of the
1998 Fiscal Year. None of the Named Officers exercised any stock options or
stock appreciation rights during the 1998 Fiscal Year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
FY-END (#) OPTIONS AT FY-END ($)(1)
--------------------------------------- ------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------- ------------------ -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
John S. Murchison, III 135,528 40,000 $0 $0
Kevin McAlea, Ph.D. 34,957 20,750 0 0
Geoffrey W. Kreiger 7,000 13,000 0 0
</TABLE>
_____________
(1) Based upon the market price $0.969 per share, determined on the basis of
the mean of the high and low prices per share of Common Stock on the Nasdaq
National Market on the last day of the 1998 Fiscal Year, less the option
exercise price payable per share.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
On October 28, 1997, the Company and John S. Murchison, III entered into a
severance agreement that will take effect in the event that Mr. Murchison's
employment should ever be terminated without cause by the Company. In such
event, the severance agreement provides that the Company will continue to pay
Mr. Murchison's base salary for one year after the date of the termination of
his employment without cause. Furthermore, the severance agreement provides that
Mr. Murchison shall not compete with the Company for a period of one year after
the date of the termination of his employment.
The Company does not have any existing employment agreements with any other
executive officer.
The Plan Administrator of the 1999 Incentive Plan will have the authority
to provide for accelerated vesting of the shares of Common Stock subject to any
outstanding options held by the Chief Executive Officer or any other executive
officer or any unvested shares actually held by such individual, including
options granted or shares issued under the 1996 and 1998 Stock Option Plans, in
connection with or certain changes in control or ownership of the Company or the
termination of the officer's employment following such event.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors currently
consists of Messrs. Goldstein, Mariotti and Skaggs. None of these individuals
was an officer or employee of the Company at any time during the 1998 Fiscal
Year or at any other time.
16
<PAGE>
No current executive officer of the Company has ever served as a member of
the board of directors or compensation committee of any other entity that has or
has had one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the duty of the Compensation Committee to review and determine the
salaries and bonuses of executive officers of the Company, including the Chief
Executive Officer, and to establish the general compensation policies for such
individuals. The Compensation Committee also administers the Management
Incentive Plan and has the authority to make discretionary option grants to the
Company's executive officers under the Company's stock option plans.
The Compensation Committee believes that the compensation programs for the
Company's executive officers should reflect the Company's performance and the
value created for the Company's shareholders. In addition, the compensation
programs should support the short-term and long-term strategic goals and values
of the Company and should reward individual contribution to the Company's
success. The Compensation Committee has reviewed and is in accord with the
compensation paid to executive officers in the 1998 Fiscal Year.
General Compensation Policy
The fundamental policy of the Compensation Committee is to provide the
Company's executive officers with competitive compensation opportunities based
upon their contribution to the development and financial success of the Company
and their personal performance. It is the Compensation Committee's objective to
have a portion of each executive officer's compensation contingent upon the
Company's performance as well as upon such executive officer's own level of
performance. Accordingly, the compensation package for each executive officer
is comprised of three elements: (i) base salary; (ii) bonus which reflects both
individual performance and the performance of the Company which, together with
base salary, is designed primarily to be competitive with salary and bonus
levels in the industry; and (iii) long-term stock-based incentive awards which
strengthen the mutuality of interests between the executive officer and the
Company's shareholders.
Factors
The principal factors that were taken into account in establishing each
executive officer's compensation package for the 1998 Fiscal Year are described
below. However, the Compensation Committee may in its discretion apply entirely
different factors, such as different measures of financial performance, for
future fiscal years.
. Base Salary. Each executive officer's base salary is adjusted each
-----------
year on the basis of (i) the Compensation Committee's evaluation of
the officer's personal performance for the year and (ii) the
competitive marketplace for persons in comparable positions. The
Company's performance and profitability may also be a factor in
determining the base salaries of executive officers.
. Annual Incentives. The DTM Corporation Management Incentive Plan (the
-----------------
"MIP") which was in effect for the 1998 Fiscal Year was established
to provide opportunities to certain key management personnel to
receive incentive compensation as a reward for levels of personal
performance above the ordinary performance standards compensated by
base salary. The MIP was designed to provide a competitive level of
rewards if all relevant performance objectives were achieved.
Participation in the MIP was limited to those key executives selected
by the Compensation Committee that have the potential to influence
significantly and positively the performance of the Company.
Each participant was assigned for the 1998 Fiscal Year to an
incentive category based on organizational level and potential impact
on important Company results. The participant categories defined the
target level of incentive opportunity, stated as a percentage of base
salary, that would be available to the participant. Category
assignments were approved by the Chief Executive Officer. The
category assignment for the Chief Executive Officer was approved by
the Compensation Committee. The annual incentive bonus for
participants for the 1998 Fiscal Year was based on 25% to 50% of
their base salary.
17
<PAGE>
The total target incentive pool for the Company was equal to the
sum of the individual target bonuses for all MIP Participants. This
total target incentive pool was then divided into separate generator
pools - one generator pool for each performance measure (e.g. Net
Income, Pre-tax Income, Earnings Per Share, Return on Equity, etc.).
The weightings for each performance measure (which were determined by
the Compensation Committee) determined the target dollar amount for
each generator pool. No bonus became payable if the performance for
the generator pool was below the threshold performance; 50% of the
target bonus became payable if the performance for the generator pool
equaled the threshold performance funding level; and 100% of the bonus
became payable if the target performance funding level (100% of goal)
was reached. The maximum bonus payable under the MIP was 150% of the
bonus payable for performance above the target performance level.
No bonuses were paid to the executive officers in the 1998 Fiscal
Year as the threshold performance targets were not attained.
Long-Term Incentives. Generally, stock option grants are made annually
--------------------
by the Compensation Committee to each of the Company's executive
officers and other selected employees pursuant to the 1999 Incentive
Plan. Each grant is designed to align the interests of the executive
officer with those of the shareholders and provide each individual
with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each
grant under the Option Plans allows the officer to acquire shares of
the Company's Common Stock at a fixed price per share (the market
price on the grant date) over a specified period of time (up to ten
years). Each option becomes exercisable in a series of installments
generally over a 3-year period (generally 35% on each of the first and
second anniversary dates of the grant and 30% on the third such
anniversary date), contingent upon the officer's continued service
with the Company. Accordingly, the option will provide a return to the
executive officer only if he or she remains in the Company's service
during the vesting period, and then only if the market price of the
shares appreciates over the option term. The Compensation Committee
may also award performance shares, restricted shares, Common Stock
and/or other incentive awards in accordance with the provisions of the
Option Plans.
The size of the option grant to each executive officer, including
the Chief Executive Officer, is set by the Compensation Committee at a
level that is intended to create a meaningful opportunity for stock
ownership based upon the individual's current position with the
Company, the individual's personal performance in recent periods and
his or her potential for future responsibility and promotion over the
option term. The maximum number of shares in respect of which options
and awards may be granted to any individual in any one year under the
1999 Incentive Plan is 100,000. The Compensation Committee also takes
into account the total number of existing vested or unvested options
held by the executive officer, as well as the exercise prices of such
options, in order to maintain an appropriate level of equity incentive
for that individual. The relevant weight given to each of these
factors may vary from individual to individual.
CEO Compensation
In setting the total compensation payable to the Company's Chief Executive
Officer, John S. Murchison, III, for the 1998 Fiscal Year, the Compensation
Committee sought to make that compensation competitive with the compensation
paid to persons with similar positions in the industry and in the Company's
geographic market, while at the same time assuring that a significant percentage
of compensation was tied to Company performance and stock price appreciation.
The Compensation Committee adjusted Mr. Murchison's base salary for the
1998 Fiscal Year in recognition of his personal performance and with the
objective of maintaining his base salary at a competitive level when compared
with the base salary levels in effect for similarly situated chief executive
officers.
The remaining components of Mr. Murchison's 1998 Fiscal Year compensation,
however, were primarily dependent upon corporate performance. Mr. Murchison was
eligible for a cash bonus under the MIP for the 1998 Fiscal Year conditioned on
the Company's attainment of performance goals with additional consideration to
be
18
<PAGE>
given to individual business plan objectives. No bonus was paid to him for
the 1998 Fiscal Year because the Company did not attain its performance goal.
The Compensation Committee awarded stock option grants totaling 50,000 shares
(25,000 under the 1996 Stock Option Plan, 25,000 under the 1998 Stock Option
Plan) to Mr. Murchison in the 1998 Fiscal Year in order to provide him with an
equity incentive to continue contributing to the financial success of the
Company. These options will have value for Mr. Murchison only if the market
price of the underlying option shares appreciates over the market price in
effect on the date the grant was made.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered officer
in any fiscal year. The limitation applies only to compensation which is not
considered to be performance-based. Non-performance based compensation paid to
the Company's executive officers for the 1998 Fiscal Year did not exceed the $1
million limit per officer. Compensation deemed paid by the Company in connection
with disqualifying dispositions of incentive stock option shares or exercises of
non-statutory stock options granted under the 1999 Incentive Plan qualifies as
performance-based compensation for purposes of Section 162(m) if such plan is
administered by a committee of "outside directors" as defined under Section
162(m). However, the 1999 Incentive Plan is currently administered by this
committee and, because of Mr. Goldstein's position with, and Mr. Mariotti's
ownership interest in, Proactive and the relationship between the Company and
Proactive as a result of the Financial Advisory Services Agreement entered into
between Proactive and the Company dated February 16, 1999, Messrs. Goldstein and
Mariotti do not qualify as "outside directors" for purposes of Section 162(m).
Accordingly, compensation deemed paid by the Company in connection with
disqualifying dispositions of incentive stock option shares or exercises of non-
statutory stock options granted under the 1999 Incentive Plan will have to be
taken into account for purposes of the $1 million limitation per covered
individual under Section 162(m).
Although the current members of the Compensation Committee did not serve on
such committee during the 1998 Fiscal Year, it is the opinion of the current
Compensation Committee that the executive compensation policies and plans
provide the necessary total remuneration program to properly align the Company's
performance and the interests of the Company's shareholders through the use of
competitive and equitable executive compensation in a balanced and reasonable
manner, for both the short and long-term.
Submitted by the Compensation Committee of the Company's Board of
Directors:
Lawrence Goldstein
Anthony Mariotti
James B. Skaggs
19
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below depicts a comparison of cumulative total shareholder
returns for the Company, the Standard & Poors SmallCap 600 Index and a peer
group of companies in the same line of business as the Company, which peer group
was selected by the Company in good faith and consists of 3D Systems Corporation
(NASD: TDSC), Stratasys, Inc. (NASD: SSYS) and Helisys, Inc. (NASD: HELI).
The graph covers the period from May 2, 1997, the commencement date of the
Company's initial public offering, to December 31, 1998, and assumes that $100
was invested in the Company's Common Stock on May 2, 1997 and concurrently in
each index, and that all dividends were reinvested. No cash dividends have been
declared on the Company's Common Stock.
This information has been provided to the Company by Zack's Investment
Research, Inc. The comparisons in the graph are required by regulations of the
Securities Exchange Commission and are not intended to forecast or to be
indicative of the possible future performance of the Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
[GRAPH APPEARS HERE]
5/2/97 12/31/97 12/31/98
------ -------- --------
DTM Corporation $100 $ 17.19 $ 12.50
Standard & Poors Smallcap 600 $100 $131.36 $134.95
Peer Group of Selected Companies $100 $ 71.75 $ 58.83
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
20
<PAGE>
CERTAIN TRANSACTIONS
SHAREHOLDERS' AGREEMENT
Under the Shareholders' Agreement among DTM, DTMAC and certain other
shareholders as of March 1996, DTMAC has certain rights of participation in
public offerings by the Company of Common Stock, sometimes referred to as
"piggyback" registration rights. The rights continue for the benefit of the
parties to that agreement who are not eligible to sell shares of Common Stock
absent registration under the Securities Act of 1933, as amended (the
"Securities Act"). However, if the underwriter of such an offering determines
that not all shares tendered for a public offering can be sold, then the shares
tendered by each shareholder will be reduced proportionately. Participating
shareholders must enter into underwriting agreements, make representations and
share in registration and filing fees. DTM is obligated to pay all other costs
associated with a public offering and must indemnify shareholders for certain
liabilities that could arise in the context of a registered public offering of
Common Stock. Shareholders have a reciprocal obligation of indemnification for
information supplied by them. Shareholders' registration rights terminate when
two conditions are met: (a) there is a public market for the Common Stock; and
(b) their Common Stock can be sold pursuant to Rule 144 under the Securities
Act.
INDEMNIFICATION AND LIABILITY OF OFFICERS AND DIRECTORS
The Company's directors and officers are granted certain protections or
indemnities by virtue of the Articles of Incorporation and Bylaws of the
Company. Under the Articles of Incorporation, directors cannot be held liable to
shareholders for monetary damages except in the event of breach of the duty of
loyalty, bad faith, intentional misconduct or knowing violations of law and
certain other specified events. The Bylaws of the Company also contain
provisions consistent with Texas law providing for indemnification of directors,
officers, employees and agents acting on behalf of the Company.
CERTAIN ARRANGEMENTS WITH DTMAC AND PROACTIVE
$909,000 Receivable
As of April 23, 1999, the Company had payables outstanding to DTMAC in the
approximate amount of $909,000, the right to which DTMAC was assigned by
Proactive in February 1999 contemporaneously with the transactions contemplated
by the stock purchase agreement between BFGoodrich and Proactive. The Company
and DTMAC have agreed to, and the Company's Board of Directors has approved, the
terms under which this debt will be repaid partially for cash and partially for
shares of the Company's Common Stock. Under the terms of the debt repayment,
DTMAC shall have demand and "piggyback" registration rights. These registration
rights will entitle DTMAC to require the Company to file a registration
statement under the Securities Act at the Company's expense with respect to
DTMAC's shares of Common Stock, as well as to participate in public offerings by
the Company of Common Stock. The registration rights agreement that will be
executed in connection with the debt repayment will terminate and replace the
registration rights that DTMAC currently has under the Shareholders' Agreement
described above. The Company and DTMAC are currently negotiating the definitive
agreements regarding the debt repayment.
Mr. Mariotti, one of the Company's directors, is the managing member of
Proactive, which is the general partner of Pro-DTM, which is the general partner
of DTMAC. Mr. Mariotti is also a limited partner in Pro-DTM and DTMAC. Mr.
Goldstein, one of the Company's directors, is a limited partner in Pro-DTM and
DTMAC. Mr. Skaggs, one of the Company's directors, is a limited partner in
DTMAC.
Financial Advisory Services Agreement
In accordance with the terms and conditions of an agreement between
Proactive and the Company dated February 16, 1999, Proactive currently renders
financial advisory services to the Company for a fee of $72,000, to be paid in
six equal monthly installments of $12,000, which installments commenced on April
1, 1999. The term of the engagement under the agreement shall end on September
1, 1999, unless extended by the mutual agreement of Proactive and the Company.
Mr. Mariotti, one of the Company's directors, is the managing member of
Proactive,
21
<PAGE>
which is the general partner of Pro-DTM, which is the general partner of DTMAC.
Mr. Goldstein, one of the Company's directors, is a principal of Proactive .
CERTAIN MATTERS AFFECTING CORPORATE GOVERNANCE
Mr. Mariotti, one of the Company's directors, is the managing member of
Proactive, which is the general partner of Pro-DTM, which is the general partner
of DTMAC. In addition, Mr. Goldstein, one of the Company's directors, is a
principal of Proactive. Although Messrs. Goldstein and Mariotti are subject to
the duties and responsibilities of directors under Texas corporate law,
Proactive may be able to have substantial influence over the Board of Directors
and could influence the outcome of matters submitted to the Company's
shareholders for their vote or consent due to the large percentage of shares of
Common Stock held by DTMAC, an affiliate of Proactive.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 which require them to file reports with respect
to their ownership of the Common Stock and their transactions in such Common
Stock. Based upon (i) the copies of Section 16(a) reports which the Company
received from such persons for their 1998 Fiscal Year transactions in the Common
Stock and their Common Stock holdings, and (ii) the written representations
received from one or more of such persons that no annual Form 5 reports were
required to be filed by them for the 1998 Fiscal Year, the Company believes that
all reporting requirements under Section 16(a) for such fiscal year were met in
a timely manner by its directors, executive officers and greater than ten
percent beneficial owners, except for Robert D. Koney, Jr.'s Initial Beneficial
Ownership Report on Form 3, which was not timely filed.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 2000 Annual Meeting must be received no
later than December 15, 1999, in order that they may be included in the proxy
statement and form of proxy relating to that meeting. Such proposals may be
included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the Securities and Exchange Commission and the
procedure set forth in the Bylaws of the Company.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to shareholders for the 1998 Fiscal
Year has been mailed concurrently with this Proxy Statement to all shareholders
entitled to notice of and to vote at the Annual Meeting. The Annual Report is
not incorporated into this Proxy Statement and is not considered proxy
solicitation material.
ANNUAL REPORT ON FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission on March 31, 1999. Shareholders may obtain a copy of this
report, without charge, upon written request to Geoffrey W. Kreiger, Secretary
of the Company, at the Company's principal executive offices located at 1611
Headway Circle, Building Two, Austin, Texas 78754.
BY ORDER OF THE BOARD OF DIRECTORS
OF DTM CORPORATION
Dated: April 30, 1999
22
<PAGE>
DTM CORPORATION
1999 STOCK INCENTIVE PLAN
-------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1999 Stock Incentive Plan is intended to promote the interests of
DTM Corporation, a Texas corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares
of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any Parent
or Subsidiary), and
(iii) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive options at
periodic intervals to purchase shares of Common Stock.
The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Board shall have the authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders but may delegate such authority in whole or in part to the Primary
Committee.
Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in those
programs may, at the Board's
1.
<PAGE>
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer those programs with respect to all such
persons.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
(i) to establish such rules as it may deem appropriate for
proper administration of the Plan, to make all factual determinations, to
construe and interpret the provisions of the Plan and the awards thereunder and
to resolve any and all ambiguities thereunder;
(ii) to determine, with respect to awards made under the
Discretionary Option Grant and Stock Issuance Programs, which eligible persons
are to receive such awards, the time or times when such awards are to be made,
the number of shares to be covered by each such award, the vesting schedule (if
any) applicable to the award, the status of a granted option as either an
Incentive Option or a Non-Statutory Option and the maximum term for which the
option is to remain outstanding;
(iii) to amend, modify or cancel any outstanding award with
the consent of the holder or accelerate the vesting of such award; and
(iv) to take such other discretionary actions as permitted
pursuant to the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties.
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any options or stock issuances under the Plan.
E. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
2.
<PAGE>
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Only non-employee Board members shall be eligible to participate
in the Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
907,755 shares. Such authorized share reserve consists of (i) the aggregate
number of shares which remain available for issuance, as of the Plan Effective
Date, under the Predecessor Plans as last approved by the Corporation's
shareholders, including the shares subject to the outstanding options to be
incorporated into the Plan and the additional shares which would otherwise be
available for future grant under the Predecessors Plans, plus (ii) an increase
of Two Hundred Fifty Thousand (250,000) shares authorized by the Board but
subject to shareholder approval at the 1999 Annual Meeting.
B. No one person participating in the Plan may receive options and
direct stock issuances for more than One Hundred Thousand (100,000) shares of
Common Stock in the aggregate per calendar year, beginning with the 1999
calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent those options
expire, terminate or are cancelled for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of
3.
<PAGE>
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted options and direct stock issuances under
this Plan per calendar year, (iii) the number and/or class of securities for
which grants are subsequently to be made under the Automatic Option Grant
Program to new and continuing non-employee Board members, (iv) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option under the Plan, and (v) the number and/or class of securities
and price per share in effect under each outstanding option incorporated into
this Plan from the Predecessor Plans. Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the enlargement or
dilution of rights and benefits under such options. The adjustments determined
by the Plan Administrator shall be final, binding and conclusive.
4.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator at the time of the option grant but in no event shall be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock in
the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section II of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation;
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-approved brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
5.
<PAGE>
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
C. CESSATION OF SERVICE.
--------------------
1. The following provisions shall govern the exercise of any
options outstanding at the time of the Optionee's cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but no
such option shall be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the date of
the Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for
Misconduct or should the Optionee engage in Misconduct while his or her
options are outstanding, then all such options shall terminate immediately
and cease to be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding:
(i) to extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service to
such period of time as the Plan Administrator shall deem appropriate, but
in no event beyond the expiration of the option term, and/or
(ii) to permit the option to be exercised, during the
applicable post-Service exercise period, for one or more additional
installments in which the Optionee would have vested had the Optionee
continued in Service.
6.
<PAGE>
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
------------------
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to the
extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime pursuant to a domestic relations order or to one
or more members of the Optionee's family or to a trust established exclusively
for Optionee and/or one or more such family members. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
-----------
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
------------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
----------------
granted is a 10% Shareholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
7.
<PAGE>
III. CHANGE IN CONTROL
A. Each option outstanding at the time of a Change in Control but
not otherwise fully vested shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Change in Control,
become exercisable for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Change in
Control, assumed or otherwise continued in full force and effect by the
successor corporation (or parent thereof) pursuant to the terms of the Change in
Control, (ii) such option is replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Change in Control on the shares of Common Stock for which the option is not
otherwise at that time exercisable and provides for subsequent payout in
accordance with the same vesting schedule applicable to those option shares or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
C. Immediately following the consummation of the Change in Control,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control.
D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control. Appropriate
adjustments to reflect such Change in Control shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the
--------
aggregate exercise price payable for such securities shall remain the same, (ii)
the maximum number and/or class of securities available for issuance over the
remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted options and direct stock
issuances under the Plan per calendar year.
E. The Plan Administrator may at any time provide that one or more
options will automatically accelerate in connection with a Change in Control,
whether or not those options are assumed or otherwise continued in full force
and effect pursuant to the terms of the Change in Control. Any such option shall
accordingly become exercisable, immediately prior to the effective date of such
Change in Control, for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. In addition, the Plan Administrator may at any time
provide that one or more of
8.
<PAGE>
the Corporation's repurchase rights shall not be assignable in connection with
such Change in Control and shall terminate upon the consummation of such Change
in Control.
F. The Plan Administrator may at any time provide that one or more
options will automatically accelerate upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed twelve (12) months)
following the effective date of any Change in Control in which those options do
not otherwise accelerate. Any options so accelerated shall remain exercisable
for fully-vested shares until the earlier of (i) the expiration of the option
-------
term or (ii) the expiration of the one (1) year period measured from the
effective date of the Involuntary Termination. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall immediately terminate upon such Involuntary Termination.
G. The portion of any Incentive Option accelerated in connection
with a Change in Control shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.
9.
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening options. Shares
of Common Stock may also be issued under the Stock Issuance Program pursuant to
share right awards which entitle the recipients to receive those shares upon the
attainment of designated performance goals or Service requirements. Each such
award shall be evidenced by one or more documents which comply with the terms
specified below.
A. PURCHASE PRICE.
--------------
1. The purchase price per share of Common Stock subject to
direct issuance shall be fixed by the Plan Administrator that shall in no event
be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the issue date.
2. Subject to the provisions of Section II of Article Five,
Shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
---------------------------
1. The Plan Administrator may issue shares of Common Stock
which are fully and immediately vested upon issuance or which are to vest in one
or more installments over the Participant's period of Service or upon attainment
of specified performance objectives. Alternatively, the Plan Administrator may
issue share right awards which shall entitle the recipient to receive a
specified number of vested shares of Common Stock upon the attainment of one or
more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full shareholder rights with
respect to the issued shares of Common Stock, whether or not the Participant's
interest in those shares is
10.
<PAGE>
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock, or should the performance
objectives not be attained with respect to one or more such unvested shares of
Common Stock, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5. The Plan Administrator may waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
6. Outstanding share right awards shall automatically
terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance goals or Service requirements
established for such awards are not attained. The Plan Administrator, however,
shall have the authority to issue shares of Common Stock in satisfaction of one
or more outstanding share right awards as to which the designated performance
goals or Service requirements are not attained.
II. CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights shall
terminate automatically, and all the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control, except to the extent (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
B. The Plan Administrator may at any time provide for the automatic
termination of one or more of those outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or (ii) an Involuntary Termination of the
Participant's Service within a designated period (not to exceed twelve (12)
months) following the effective date of any Change in Control in which those
repurchase rights are assigned to the successor corporation (or parent thereof)
or otherwise continue in full force and effect.
11.
<PAGE>
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
12.
<PAGE>
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. GRANT DATES. Options shall be made on the dates specified
-----------
below:
1. Each individual serving as a non-employee Board member on
the Plan Effective Date shall automatically be granted on such date a Non-
Statutory Option to purchase Twenty-Four Thousand (24,000) shares of Common
Stock, provided such individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.
2. Each individual who is first elected or appointed as a non-
employee Board member on or at any time after the Plan Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase Twenty-Four Thousand (24,000) shares of Common
Stock, provided such individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.
3. On the date of each Annual Shareholders Meeting held after
the Plan Effective Date, beginning with the 1999 Annual Shareholders Meetings,
each individual who is to continue to serve as a non-employee Board member,
whether or not that individual is standing for re-election to the Board, shall
automatically be granted a Non-Statutory Option to purchase Five Thousand
(5,000) shares of Common Stock, provided such individual has served as a non-
employee Board member for at least six (6) months.
B. EXERCISE PRICE.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial Twenty-Four Thousand (24,000)-
share option shall vest, and the Corporation's repurchase right shall lapse, in
a series of three (3) successive equal annual installments upon the Optionee's
completion of each year of Board service over the three (3)-year period measured
from the grant date. Each annual Five Thousand (5,000)-share option shall vest,
and the Corporation's repurchase right shall
13.
<PAGE>
lapse, upon the Optionee's completion of one (1) year of Board service measured
from the grant date.
E. CESSATION OF BOARD SERVICE. The following provisions shall govern
--------------------------
the exercise of any options outstanding at the time of the Optionee's cessation
of Board service:
(i) Any option outstanding at the time of the Optionee's
cessation of Board service for any reason shall remain exercisable for a
twelve (12)-month period following the date of such cessation of Board
service, but in no event shall such option be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) Following the Optionee's cessation of Board service,
the option may not be exercised in the aggregate for more than the number
of shares in which the Optionee was vested on the date of such cessation of
Board service. Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be
outstanding for any and all shares in which the Optionee is not otherwise
at that time vested.
(iv) However, should the Optionee cease to serve as a
Board member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such option
may, during the twelve (12)-month exercise period following such cessation
of Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
II. CHANGE IN CONTROL
A. In the event of any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option may, immediately prior to
the effective date of such Change in Control, be exercised for all or any
portion of those shares as fully-vested shares of Common Stock. Each such
option accelerated in connection with a Change in Control shall terminate upon
the Change in Control, except to the extent assumed by the successor corporation
(or parent thereof) or otherwise continued in full force and effect pursuant to
the terms of the Change in Control.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control.
14.
<PAGE>
C. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments shall also be made to the exercise
price payable per share under each outstanding option, provided the aggregate
--------
exercise price payable for such securities shall remain the same.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for options made under
the Discretionary Option Grant Program.
15.
<PAGE>
ARTICLE FIVE
MISCELLANEOUS
-------------
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at
--------------
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
16.
<PAGE>
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Plan Effective Date.
B. The Plan shall serve as the successor to the Predecessor Plans,
and no further options or other stock awards, shall be made under the
Predecessor Plans after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Changes in Control, may, in the Plan Administrator's discretion, be extended
to one or more options incorporated from the Predecessor Plans which do not
otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) the expiration
--------
of the ten (10)-year period measured from and after the Plan Effective Date,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding options and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until there
is obtained shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
shareholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
17.
<PAGE>
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
18.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
------------------------------
grant program in effect under the Plan.
B. BENEFICIARY shall mean, in the event the Plan Administrator
-----------
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such person's
rights under any outstanding awards held by him or her at the time of death. In
the absence of such designation or procedure, the Beneficiary shall be the
personal representative of the estate of the Optionee or Participant or the
person or persons to whom the award is transferred by will or the laws of
descent and distribution.
C. BOARD shall mean the Corporation's Board of Directors.
-----
D. CHANGE IN CONTROL shall mean a change in ownership or control of
-----------------
the Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by
the Corporation's shareholders, unless securities representing more than
fifty percent (50%) of the total combined voting power of the voting
securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Corporation's
outstanding voting securities immediately prior to such transaction,
(ii) any shareholder-approved transfer or other
disposition of all or substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than eighty
percent (80%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's shareholders.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
F. COMMON STOCK shall mean the Corporation's common stock.
------------
19.
<PAGE>
G. CORPORATION shall mean DTM Corporation, a Texas corporation, and
-----------
its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
----------------------------------
option grant program in effect under the Plan.
I. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as such
price is reported on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for
the Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
L. INCENTIVE OPTION shall mean an option which satisfies the
----------------
requirements of Code Section 422.
M. INVOLUNTARY TERMINATION shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A)
a change in his or her position with the Corporation or Parent or
Subsidiary employing the individual which materially reduces his or her
duties and responsibilities or the level of management to which he or she
reports, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonus under any performance based
bonus or incentive
20.
<PAGE>
programs) by more than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
N. MISCONDUCT shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such
person, whether by omission or commission, which adversely affects the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. This shall not limit the grounds for the dismissal or discharge of any
person in the Service of the Corporation (or any Parent or Subsidiary).
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as
--------
amended.
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
Q. OPTIONEE shall mean any person to whom an option is granted under
--------
the Discretionary Option Grant or Automatic Option Grant Program.
R. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
S. PARTICIPANT shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
T. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
--------------------------------------------
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
U. PLAN shall mean the Corporation's 1999 Stock Incentive Plan, as
----
set forth in this document.
V. PLAN ADMINISTRATOR shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction. However, the Primary Committee shall have
the plenary authority to make all factual determinations and to construe and
interpret
21.
<PAGE>
any and all ambiguities under the Plan to the extent such authority is not
otherwise expressly delegated to any other Plan Administrator.
W. PLAN EFFECTIVE DATE shall mean the date on which the Plan is
-------------------
approved by the Corporation's shareholders.
X. PREDECESSOR PLANS shall mean the Corporation's 1996 and 1998
-----------------
Stock Option Plans.
Y. PRIMARY COMMITTEE shall mean the committee of two (2) or more
-----------------
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
Z. SECONDARY COMMITTEE shall mean a committee of one (1) or more
-------------------
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
AA. SECTION 16 INSIDER shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
BB. SERVICE shall mean the performance of services for the
-------
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
CC. STOCK EXCHANGE shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
DD. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
----------------------
effect under the Plan.
EE. SUBSIDIARY shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
FF. TAXES shall mean the withholding taxes payable by the holder of
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Non-Statutory Options or unvested shares of Common Stock in connection with the
exercise of those options or the vesting of those shares.
GG. 10% SHAREHOLDER shall mean the owner of stock (as determined
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under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
22.
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DTM CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DTM CORPORATION
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Shareholders to be held May 25, 1999 and the
related Proxy Statement dated April 30, 1999 and appoints John S. Murchison, III
and Geoffrey W. Krelger, and each of them, the Proxy of the undersigned, with
full power of substitution, to vote all shares of Common Stock of DTM
Corporation, a Texas Corporation (the "Company"), which the undersigned is
entitled to vote, either on his or her own behalf or on behalf of any entity or
entities, at the Annual Meeting of Shareholders of the Company to be held at the
Doubletree Hotel Austin, 6505 IH-35 North, Austin, Texas on May 25, 1999 at 9:00
a.m. Central Daylight Time (the "Annual Meeting"), and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this Proxy
shall be voted in the manner set forth hereon.
(CONTINUED AND TO BE SIGNED ON THE REVERSE)
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. FOLD AND DETACH HERE .
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The Board of Directors recommends a vote FOR each of the directors listed below and a vote FOR each of the Please mark
listed proposals. This Proxy, when properly executed, will be voted as specified hereon. If no specification your votes as
is made, the Proxy will be voted "FOR" the election of each of the directors listed below and "FOR" each of indicated in [X]
the other proposals. this sample
<S> <C>
1. TO ELECT THE FOLLOWING FIVE (5) NOMINEES AS DIRECTORS to serve for a one-year term ending on the next annual meeting of
shareholders or until his successor is duly elected and qualified:
FOR all nominees WITHHOLD AUTHORITY NOMINEES: LAWRENCE GOLDSTEIN; ANTHONY MARIOTTI; JOHN S. MURCHISON, III;
listed to the right to vote for all nominees THOMAS G. RICKS: AND JAMES B. SKAGGS
(except as marked listed to the right
to the contrary) (INSTRUCTION: To withhold authority to vote for any individual nominee, write
[_] [_] that nominee's name on the space provided below.)
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2. TO APPROVE THE DTM CORPORATION 1999 STOCK 3. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP as Independent auditors of
INCENTIVE PLAN. the Company for the 1999 fiscal year.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
4. In accordance with the discretion of the proxy holders, to act upon all matters Incident to the conduct of the meeting and upon
other matters as may property come before the meeting.
PLEASE PRINT THE NAME(S) appearing on each share certificate(s) over which you have voting authority:
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(Print name(s) exactly as it (they) appear(s) on certificates)
Date:_________________________________________________________________________________________________________________________, 1999
Please sign your name:______________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
(Authorized Signature(s))
IMPORTANT: PLEASE SIGN AS YOUR NAME APPEARS HEREON. IF SHARES ARE HELD JOINTLY, ALL HOLDERS MUST SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
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. FOLD AND DETACH HERE .
</TABLE>
