<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
<TABLE>
<S> <C>
[_] 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
</TABLE>
SOLOPOINT, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
-------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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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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<PAGE>
SOLOPOINT, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 2, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
SoloPoint, Inc., a California corporation (the "Company"), will be held on
Tuesday, June 2, 1998 at 11:00 a.m., local time, at the Company's offices
located at 130-B Knowles Drive, Los Gatos, California 95032 for the following
purposes:
1. To elect four directors for a term of one year to expire at the
Company's Annual Meeting of Shareholders in 1999;
2. To increase the number of shares of Common Stock reserved for issuance
under the Company's 1993 Incentive Stock Plan from 897,000 to 1,397,000
shares;
3. To amend the Company's Articles of Incorporation to effect a one-for-
four reverse stock split of the Company's outstanding Common Stock.
4. To ratify the appointment of Ernst & Young LLP as independent auditors
for the fiscal year ending December 31, 1998; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this notice.
Only shareholders of record at the close of business on April 10, 1998 are
entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign
and return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any shareholder attending the meeting may
vote in person even if the shareholder has returned a proxy.
By order of the Board of Directors
/s/ Michael J. O'Donnell
Michael J. O'Donnell
Secretary
Los Gatos, California
April 30, 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
SOLOPOINT, INC.
PROXY STATEMENT FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Board of Directors of
SoloPoint, Inc., a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held on Wednesday,
June 2, 1998, at 11:00 a.m., local time, or at any adjournment thereof, for
the purposes set forth in this Proxy Statement and in the accompanying Notice
of Annual Meeting of Shareholders. The Annual Meeting will be held at the
Company's principal executive offices located at 130-B Knowles Dr., Los Gatos,
California 95032. The Company's telephone number at that address is (408) 364-
8850.
These proxy solicitation materials were mailed on or about April 30, 1998 to
all shareholders entitled to vote at the Annual Meeting. The Company's Board
of Directors has unanimously approved the matters being submitted for
shareholder approval at the Annual Meeting. A copy of the Company's Form 10-
KSB filed with Securities and Exchange Commission on March 31, 1998 will be
furnished by the Company to any shareholder upon written request to the
Company. Request should be addressed to Ronald J. Tchorzewski 130-B Knowles
Drive, Los Gatos, California 95032.
RECORD DATE; OUTSTANDING SHARES
Shareholders of record at the close of business on April 10, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, 8,305,818 shares of Common Stock were issued and
outstanding held of record by approximately 106 shareholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Except as provided below with respect to cumulative voting, each share of
Common Stock is entitled to one vote with respect to the matters set forth
herein. Every shareholder voting in the election of directors may cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or distribute the shareholder's votes
on the same principle among as many candidates as the shareholder thinks fit,
provided that votes cannot be cast for more than the number of directors to be
elected. However, no shareholder shall be entitled to cumulate votes unless
the candidate's name has been placed in nomination prior to the voting, and
the shareholder, or any other shareholder, has given notice at the Annual
Meeting prior to the voting of the intention to cumulate such shareholder's
votes. The Company has agreed (for a period of 36 months from the closing of
the secondary public offering in January 1998) to grant to H.J. Meyers & Co.,
Inc. (the underwriter for the Company's secondary public offering) the right
to nominate one member of the Board of Directors provided such nominee is
acceptable to the Company. See "Certain Relationships and Related
Transactions."
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited by certain of the Company's officers, directors and regular
employees, without compensation, personally or by telephone or telecopy.
<PAGE>
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals which are intended to be presented by shareholders at the
Company's next annual meeting of shareholders, which is proposed to be held in
June 1999, must be received by the Company no later than December 31, 1998 in
order that they may be included in the proxy statement and form of proxy
relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
As set by the Board of Directors pursuant to the Bylaws of the Company, the
authorized number of directors is currently set as five. At the Annual
Meeting, four nominees are to be elected. Directors Giuliano Raviola and
Charles Ross have chosen not to stand for re-election. Following the Annual
Meeting, there will be one vacancy on the Board of Directors. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's nominees named below. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. It is not expected that
any nominee will be unable or will decline to serve as a director. If a
nomination is made to elect an individual to the vacant position on the Board
of Directors, the proxy holders will propose a nominee to fill such position
and vote all proxies received by them in accordance with cumulative voting to
assure the election of as many of the Company's nominees as possible.
The nominees, and certain information about them as of December 31, 1997,
are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE COMPANY POSITIONS SINCE
--------------- --- ----------------- --------
<S> <C> <C> <C>
Charlie Bass(1)......... 56 Director 1993
Arthur G. Chang......... 39 Chief Operating Officer --
Edward M. Esber, Jr..... 45 President, Chief Executive Officer and 1995
Director
Patrick Grady(2)........ 30 Director 1996
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Charlie Bass has served as a Director of the Company since he co-founded the
Company in March 1993 and served as the Company's Chairman of the Board until
February 1998. Dr. Bass served as Chief Executive Officer of the Company from
March 1995 until October 1995. Dr. Bass is the general partner of Bass
Associates, a venture capital firm and has served in that capacity since
September 1989. Dr. Bass also currently serves as a Director of Meridian Data,
Inc., and Socket Communications, Inc. Dr. Bass is also a consulting professor
of electrical engineering at Stanford University. Dr. Bass holds a Ph.D. in
electrical engineering from the University of Hawaii.
Edward M. Esber, Jr. became the Chairman of the Board of the Company in
February 1998. Mr. Esber served as the Company's President, Chief Executive
Officer, and Director from October 1995 until February 1998 and served as the
Company's Chief Financial Officer from May 1996 until July 1997. From May 1994
to June 1995, Mr. Esber was Chairman, Chief Executive Officer and President of
Creative Insights, Inc., a computer toys company. From May 1993 to June 1994,
Mr. Esber was President and Chief Operating Officer of Creative Labs, Inc.,
the US subsidiary of Creative Technology Ltd. From 1985 to 1990, Mr. Esber was
Chairman, President, Chief Executive Officer and Director of Ashton-Tate, a
database software company and maker of dBase. Mr. Esber as served as a
director of Quantum Corp. since 1988, Borealis Technology Corporation since
1996 and Integrated Circuit Systems Technology since 1997. Mr. Esber holds a
bachelor's degree in computer engineering from Case Western Reserve
University, a master's degree in electrical engineering from Syracuse
University and a M.B.A. in general management from Harvard Business School.
2
<PAGE>
Patrick Grady has served as a Director of the Company since July 1996. Since
March 1998, Mr. Grady has served as the Chief Executive Officer and Chairman
of the Board of Directors of Borealis Technology Corp. From June 1993 to
February 1998, Mr. Grady was a Managing Director, Venture Capital for H.J.
Meyers & Co., Inc., an investment bank. From June 1993 to March 1996 Mr. Grady
was Senior Vice President of Corporate Finance at H.J. Meyers & Co., Inc. From
March 1991 to May 1993, Mr. Grady was Vice President of Corporate Finance at
Josephthal Lyon & Ross, an investment bank. Mr. Grady also currently serves as
a Director of Deltapoint, Inc., and Borealis Technology Corp. Mr. Grady
attended Pace University in New York. Mr. Grady was nominated by the
underwriter of the Company's secondary public offering completed on January 9,
1998 to serve on the Board of Directors.
Arthur G. Chang joined the Company as Chief Operating Officer and Vice
President of Research and Development in February 1996. Effective February
1998, Mr. Chang serves as the Company's President and Chief Executive Officer.
From November 1993 to April 1995, Mr. Chang was Chairman, President, Chief
Executive Officer and Director of CommVision Corporation, a wide area remote
access company. From February 1988 to April 1993, Mr. Chang was co-founder and
Senior Vice President of Product Development and Product Marketing for
Parallan Computer, Inc. (now Meridian Data, Inc.), a company that made fault-
tolerant superservers for PC networks. Mr. Chang holds a bachelors degree in
electrical engineering from Northwestern University and a master's degree in
electrical and computer science from the University of California at Berkeley.
All of the foregoing individuals, with the exception of Mr. Chang, are
currently serving as directors of the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings and took action by written consent
five times during fiscal 1997. No incumbent director during the last fiscal
year attended fewer than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors held while such person was a director and
(ii) the total number of meetings held by all committees on which such
director served while a member of the Board of Directors.
The Board of Directors has two standing committees: the Compensation
Committee and the Audit Committee. The Board of Directors has no nominating
committee or any other committee performing a similar function.
During 1997, directors Charlie Bass and Giuliano Raviola served on the
Compensation Committee, which establishes salaries and incentive compensation
for employees of the Company other than executive officers, and makes
recommendations to the Board of Directors with regard to salaries and
incentive compensation for executive officers of the Company. The Compensation
Committee held one meeting and took action by written consent twice during
fiscal 1997. Messrs. Bass and Raviola each attended the committee meeting.
During 1997, directors Charles Ross and Patrick Grady served on the Audit
Committee, which reviews the results and scope of the audit and other services
provided by the Company's independent auditors. The Audit Committee held three
meetings during fiscal 1997. Messrs. Ross and Grady each attended the
committee meetings.
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board of Directors, but directors may be reimbursed for
reasonable expenses incurred in connection with attendance at Board committee
meetings.
Directors of the Company receive an automatic grant of an option to purchase
12,000 shares of Common Stock of the Company each year on the day immediately
following the Company's annual shareholders' meeting. In July 1997, the
Company granted options exercisable for 12,000 shares of Common Stock to each
of Directors Bass, Raviola, Grady and Ross or their affiliates. Such options
vest on a monthly basis over a four-year period from the date of grant.
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<PAGE>
REQUIRED VOTE
The four nominees receiving the highest number of affirmative votes of the
shares present or represented by proxy and entitled to vote will be elected as
directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF THE NOMINEES.
4
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF 1993 INCENTIVE STOCK PLAN
GENERAL
The Company's 1993 Incentive Stock Plan (the "Incentive Plan"), was
originally adopted by the Board of Directors and approved by the shareholders
in March 1993. The Incentive Plan provides for grants of incentive stock
options, nonstatutory stock options, and stock purchase rights to employees
(including employees who are officers) of the Company and its subsidiaries.
The Incentive Plan also provides for grants of nonstatutory stock options and
stock purchase rights to consultants. In April 1998, the Board of Directors
approved an amendment to the Incentive Plan increasing to a total of 1,397,000
the shares of Common Stock reserved for issuance under the Incentive Plan.
There are currently 897,000 shares of Common Stock reserved for issuance under
the Incentive Plan. As of March 31, 1998, options to purchase 507,000 shares
were outstanding under the Incentive Plan and 267,780 shares remained
available for future grant. The Incentive Plan may be administered by the
Board of Directors or by a committee appointed by the Board. The Incentive
Plan is currently administered by the Board of Directors.
The shareholders are now being requested to consider and approve an
amendment to the Incentive Plan to increase the number of shares of Common
Stock reserved for issuance thereunder to a new total of 1,397,000 shares.
SUMMARY OF THE INCENTIVE PLAN
The essential features of the Incentive Plan are summarized below. This
summary does not purport to be complete and is subject to, and qualified by
reference to, all provisions of the Incentive Plan, a copy of which is
available from the Company upon request.
General. The purpose of the Incentive Plan is to attract and retain the best
available personnel, to provide additional incentive to the employees and
consultants of the Company and to promote the success of the Company's
business. Options and stock purchase rights may be granted under the Incentive
Plan. Options granted under the Incentive Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory stock
options.
Administration. The Incentive Plan may generally be administered by the
Board or a committee appointed by the Board. The administrators of the
Incentive Plan are referred to herein as the "Administrator."
Eligibility; Limitations. Nonstatutory stock options and stock purchase
rights may be granted under the Incentive Plan to employees, consultants and
directors of the Company. Incentive stock options may be granted only to
employees. The Administrator, in its discretion, selects the employees,
consultants and directors to whom options and stock purchase rights may be
granted, the time or times at which such options and stock purchase rights
shall be granted, and the number of shares subject to each such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options and stock purchase rights granted to such
persons, the Incentive Plan provides that no employee may be granted, in any
fiscal year of the Company, options and stock purchase rights to purchase more
than 75,000 shares of Common Stock. Notwithstanding this limit, however, in
connection with an employee's initial employment, he or she may be granted
options or stock purchase rights to purchase up to an additional 75,000 shares
of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market
5
<PAGE>
value of the Common Stock on the date such option is granted; provided,
however, the exercise price of an incentive stock option granted to a 10%
shareholder may not be less than 110% of the fair market value of the
Common Stock on the date such option is granted. The exercise price of a
nonstatutory stock option shall be determined by the Administrator. The
fair market value of the Common Stock is generally determined with
reference to the mean of the bid and asked prices of the Common Stock for
the date of grant as reported by the Wall Street Journal or the Nasdaq
National Market System.
(b) Exercise of Option; Form of Consideration. The Administrator
specifies in the option agreement when options become exercisable. The
means of payment for shares issued upon exercise of an option is specified
in each option agreement. The Incentive Plan permits payment to be made by
cash, check, promissory note, other shares of Common Stock of the Company
(with some restrictions), cashless exercise, any combination thereof,
reduction of any liability to optionee, or any other legal form of
consideration.
(c) Term of Option. The term of option may be no more than ten (10) years
from the date of grant; provided that in the case of an incentive stock
option granted to a 10% shareholder, the term of the option may be no more
than five (5) years from the date of grant. No option may be exercised
after the expiration of its term.
(d) Termination of Employment. If an optionee's employment or consulting
relationship terminates for any reason (other than death or disability),
then all options held by the optionee under the Incentive Plan expire on
the earlier of (i) the date set forth in his or her notice of grant (which
date in the case of an incentive stock option may not be more than three
(3) months after the date of such termination, and in the case of a
nonstatutory stock option, may not be more than six (6) months after the
date of such termination), or (ii) the expiration date of such option. To
the extent the option is exercisable at the time of the optionee's
termination, the optionee may exercise all or part of his or her option at
any time before it terminates.
(e) Disability. If an optionee's employment or consulting relationship
terminates as a result of disability, then all options held by such
optionee under the Incentive Plan expire (i) 6 months from the date of such
termination (or such longer period of time not exceeding 12 months as
determined by the Administrator), but only to the extent that the optionee
is entitled to exercise it on the date of termination (and in no event
later than the expiration of the term of the option as set forth in the
notice of grant). The optionee (or the optionee's estate or a person who
has acquired the right to exercise the option by bequest or inheritance),
may exercise all or part of the option at any time before such expiration
to the extent that the option was exercisable at the time of such
termination.
(f) Death. In the event of an optionee's death: (i) during the optionee's
employment or consulting relationship with the Company where the optionee
has been in continuous status as an employee or consultant of the Company
since the date of the grant of the option, the option may be exercised, at
any time within 6 months of the date of death (but no later than the
expiration date of such option) by the optionee's estate or a person who
has acquired the right to exercise the option by bequest or inheritance,
but only to the extent that the optionee's right to exercise the option
would have accrued if he or she had remained an employee or consultant of
the Company 6 months after the date of death; or (ii) within 30 days (or
such other period of time not exceeding 3 months as determined by the
Administrator) after the optionee's employment or consulting relationship
with the Company terminates, the option may be exercised at anytime within
6 months (or such other period of time as determined by the Administrator)
following the date of death (but in no event later than the expiration date
of the option) by the optionee's estate or a person who has acquired the
right to exercise the option by bequest or inheritance, but only to the
extent of the optionee's right to exercise the option at the date of
termination.
(g) Nontransferability of Options: Options granted under the Incentive
Plan are not transferable other than by will or the laws of descent and
distribution, and may be exercisable during the optionee's lifetime only by
the optionee.
(h) Other Provisions: The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Incentive Plan as may
be determined by the Administrator.
6
<PAGE>
Stock Purchase Rights. A stock purchase right gives the purchaser a period
of no longer than 6 months from the date of grant to purchase Common Stock.
The purchase price of Common Stock purchased pursuant to a stock purchase
right is determined in the same manner as for nonstatutory stock options. A
stock purchase right is accepted by the execution of a restricted stock
purchase agreement between the Company and the purchaser, accompanied by the
payment of the purchase price for the shares. Unless the Administrator
determines otherwise, the restricted stock purchase agreement shall give the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment or consulting relationship with the
Company for any reason (including death and disability). The purchase price
for any shares repurchased by the Company shall be the original price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option lapses at a rate determined by
the Administrator. A stock purchase right is nontransferable other than by
will or the laws of descent and distribution, and may be exercisable during
the optionee's lifetime only by the optionee.
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of
stock subject to the Incentive Plan, the number and class of shares of stock
subject to any option or stock purchase right outstanding under the Incentive
Plan, and the exercise price of any such outstanding option or stock purchase
right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may allow the
optionees to exercise their options as to all the stock covered by such
options fifteen (15) days prior to the consummation of the liquidation or
dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right may be substituted by
the successor corporation. If the successor corporation refuses to assume an
option or stock purchase rights, or to substitute substantially equivalent
options or rights, then the optionee shall fully vest in and have the right to
exercise the option or stock purchase right as to all of the stock subject to
such option or stock purchase right, including shares as to which it would not
otherwise be vested or exercisable.
Amendment and Termination of the Incentive Plan. The Board may amend, alter,
suspend or terminate the Incentive Plan, or any part thereof, at any time and
for any reason. However, the Company shall obtain shareholder approval for any
amendment to the Incentive Plan to the extent necessary to comply with Section
162(m) of the Code and Section 422 of the Code, or any other applicable rule
or statute. No such action by the Board or shareholders may alter or impair
any option or stock purchase right previously granted under the Incentive Plan
without the consent of the optionee.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated
as long-term capital gain or loss. If these holding periods are not satisfied,
the optionee recognizes ordinary income at the time of disposition equal to
the difference between the exercise price and the lower of (i) the fair market
value of the shares at the date of the option exercise or (ii) the sale price
of the shares. Any gain or loss recognized on such a premature disposition of
the shares in excess of the amount treated as ordinary income is treated as
long-term or short-term capital gain or loss, depending on the holding period.
A different rule for measuring ordinary income upon such a premature
disposition may apply if the optionee is also an officer, director, or 10%
shareholder of the Company. The Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured
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<PAGE>
by the excess of the then fair market value of the shares over the exercise
price. Any taxable income recognized in connection with an option exercise by
an employee of the Company is subject to tax withholding by the Company.
Unless limited by Section 162(m) of the Code, the Company is entitled to a
deduction in the same amount as the ordinary income recognized by the
optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. Net capital
gains on shares held between 12 and 18 months may be taxed at a maximum
federal rate of 28%, while net capital gains on shares held for more than 18
months may be taxed at a maximum federal rate of 20%. Capital losses are
allowed in full against capital gains and up to $3,000 against other income.
Stock Purchase Rights. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time
of purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject
to a substantial risk of forfeiture. The stock will generally cease to be
subject to a substantial risk of forfeiture when it is no longer subject to
the Company's right to repurchase the stock upon the purchaser's termination
of employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding
period by timely filing an election pursuant to Section 83(b) of the Code. In
such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock
on the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% shareholder of the Company.
The foregoing is only a summary of the effect of federal income taxation
upon optionees, holders of stock purchase rights, and the Company with respect
to the grant and exercise of options and stock purchase rights under the
Incentive Plan. It does not purport to be complete, and does not discuss the
tax consequences of the employee's or consultant's death or the provisions of
the income tax laws of any municipality, state or foreign country in which the
employee or consultant may reside.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the Annual Meeting is required to approve and ratify
the amendment to the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE AMENDMENT TO THE 1993 INCENTIVE STOCK PLAN
8
<PAGE>
PROPOSAL NO. 3
REVERSE STOCK SPLIT
GENERAL
The Board of Directors of the Company has approved a proposal (the "Reverse
Stock Split Proposal") to amend the Company's Articles of Incorporation to
effect a one-for-four reverse stock split of the Company's outstanding Common
Stock, no par value per share (the "Common Stock"), subject to the approval by
the shareholders of the Company. The Reverse Stock Split Proposal provides for
the combination and reclassification of the presently issued and outstanding
shares of Common Stock, into a smaller number of shares of identical Common
Stock, on the basis of one share of Common Stock for each four shares of
Common Stock previously issued and outstanding (the "Reverse Stock Split").
Except as may result from the payment of cash for fractional shares as
described below, each shareholder will hold the same percentage of Common
Stock outstanding immediately following the Reverse Stock Split as each
shareholder did immediately prior to the Reverse Stock Split. If approved by
the shareholders of the Company as provided herein, the Reverse Stock Split
will be effected by an amendment to the Company's Articles of Incorporation in
substantially the form attached to this Proxy Statement as Appendix A (the
"Reverse Stock Split Amendment"), and will become effective upon the filing of
the Reverse Stock Split Amendment with the Secretary of State of California
(the "Effective Time"). The following discussion is qualified in its entirety
by the full text of the Reverse Stock Split Amendment, which is hereby
incorporated by reference herein.
At the Effective Time, each share of Common Stock issued and outstanding
will automatically be reclassified and converted into one-fourth of a share of
Common Stock. Fractional shares of Common Stock will not be issued as a result
of the Reverse Stock Split. Shareholders entitled to receive a fractional
share of Common Stock as a consequence of the Reverse Stock Split will,
instead, receive from the Company a cash payment in U.S. dollars equal to such
fraction multiplied by four times the arithmetic mean average closing bid
price per share of the Common Stock on the Nasdaq Stock Market, Inc.
("Nasdaq") for the five trading days immediately preceding the Effective Date.
The Company expects that, if the Reverse Stock Split Proposal is approved by
the shareholders at the Annual Meeting, the Reverse Stock Split Amendment will
be filed promptly. However, notwithstanding approval of the Reverse Stock
Split Proposal by the shareholders of the Company, the Board of Directors of
the Company may elect not to file, or to delay the filing of, the Reverse
Stock Split Amendment, if the Board of Directors determines that filing the
Reverse Stock Split Amendment would not be in the best interest of the
Company's shareholders at such time. Factors leading to such a determination
could include, without limitation, any possible effect on Nasdaq listing or
future securities offerings (see "Reasons for the Reverse Stock Split
Proposal," below).
REASONS FOR THE REVERSE STOCK SPLIT
The primary purpose of the Reverse Stock Split is to combine the outstanding
shares of Common Stock so that the Common Stock outstanding after giving
effect to the Reverse Stock Split trades at a significantly higher price per
share than the Common Stock outstanding before giving effect to the Reverse
Stock Split.
During the 1997 calendar year, the closing bid price for the Common Stock on
the SmallCap tier of The Nasdaq Stock Market, Inc. (the "Nasdaq SmallCap
Market") ranged from $0.75 to $3.88 per share. The closing bid price for the
Common Stock on April 13, 1998, was $0.56 per share. The Company believes that
such a low quoted market price per share may discourage potential new
investors, increase market price volatility and decrease the liquidity of the
Common Stock. Most importantly, pursuant to new Nasdaq SmallCap Market rules
that went into effect on February 23, 1998 (the "New Nasdaq Listing
Requirements") the minimum bid price for the Company's Common Stock must be at
least $1.00 per share for continued inclusion of the Common Stock on the
Nasdaq SmallCap Market. The Company believes, but cannot assure, that the
Reverse Stock Split will enable the Common Stock to trade above the minimum
bid price established by the New Nasdaq Listing Requirements.
9
<PAGE>
The Company believes that maintaining the listing of the Common Stock on
Nasdaq is in the best interests of the Company and its shareholders. Inclusion
in Nasdaq increases liquidity and may potentially minimize the spread between
the "bid" and "asked" prices quoted by market makers. Further, a Nasdaq
listing may enhance the Company's access to capital and increase the Company's
flexibility in responding to anticipated capital requirements. The Company
believes that prospective investors will view an investment in the Company
more favorably if its shares qualify for listing on Nasdaq.
For the above reasons, the Company believes that the Reverse Stock Split is
in the best interests of the Company and its shareholders. However, there can
be no assurances that the Reverse Stock Split will have the desired
consequences. The Company anticipates that, following the consummation of the
Reverse Stock Split, the Common Stock will trade at a price per share that is
significantly higher than the current market price of the Common Stock.
However, there can be no assurance that, following the Reverse Stock Split,
the Common Stock will trade at four times the market price of the Common Stock
prior to the Reverse Stock Split.
EFFECT OF THE REVERSE STOCK SPLIT PROPOSAL
Subject to shareholder approval, the Reverse Stock Split Proposal will be
effected by filing the Reverse Stock Split Amendment to the Company's Articles
of Incorporation, and will be effective immediately upon such filing. Although
the Company expects to file the Reverse Stock Split Amendment with the
California Secretary of State's office promptly following approval of the
Reverse Stock Split Proposal at the Annual Meeting, the actual timing of such
filing will be determined by the Company's management based upon their
evaluation as to when such action will be most advantageous to the Company and
its shareholders. The Company reserves the right to forego or postpone filing
the Reverse Stock Split Amendment, if such action is determined to be in the
best interests of the Company and its shareholders.
Each shareholder that owns fewer than four Common Stock will have such
shareholder's fractional share of Common Stock converted into the right to
receive cash as set forth below in "Exchange of Stock Certificates and Payment
for Fractional Shares." The interest of such shareholder in the Company will
thereby be terminated, and such shareholder will have no right to share in the
assets or future growth of the Company. Each shareholder that owns four or
more shares of Common Stock will continue to own shares of Common Stock and
will continue to share in the assets and future growth of the Company as a
shareholder. Such interest will be represented by one-fourth as many shares as
such shareholder owned before the Reverse Stock Split, subject to the
adjustment for fractional shares in which case such shareholder shall receive
cash in lieu of such fractional share. The number of shares of Common Stock
that may be purchased upon the exercise of outstanding options, warrants, and
other securities convertible into, or exercisable or exchangeable for, shares
of Common Stock (collectively, "Convertible Securities") and the per share
exercise or conversion prices thereof, will be adjusted appropriately as of
the Effective Date, so that the aggregate number of shares of Common Stock
issuable in respect of Convertible Securities immediately following the
Effective Date will be one-fourth of the number issuable in respect thereof
immediately prior to the Effective Date, the per share exercise price
immediately following the Effective Date will be 400% of the per share
exercise or conversion price immediately prior to the Effective Date, and the
aggregate exercise or conversion prices thereunder shall remain unchanged.
The Reverse Stock Split will also result in some shareholders owning "odd
lots" of less than 100 shares of Common Stock received as a result of the
Reverse Stock Split. Brokerage commissions and other costs of transactions in
odd lots may be higher, particularly on a per-share basis, than the cost of
transactions in even multiples of 100 shares.
The Company is authorized to issue 35,000,000 shares of Common Stock, of
which 8,305,818 shares were issued and outstanding at the close of business on
the Record Date. The Company is also authorized to issue 5,000,000 shares of
Preferred Stock, no par value (the "Preferred Stock"), of which none were
issued and outstanding at the close of business on the Record Date.
Adoption of the Reverse Stock Split will reduce the shares of Common Stock
outstanding on the Record Date from 8,305,818 to approximately 2,076,460 but
will not effect the number of authorized shares of Common
10
<PAGE>
Stock. After the Reverse Stock Split, the Company estimates that it will have
approximately the same number of shareholders. Except for the receipt of cash
in lieu of fractional interests, the reverse stock split will not affect any
shareholder's proportionate equity interest in the company.
As a result of the Reverse Stock Split, the Company will have a greater
number of authorized but unissued shares of Common Stock than prior to the
Reverse Stock Split. The increase in the authorized but unissued shares of
Common Stock could make a change in control of the Company more difficult to
achieve. Under certain circumstances, such shares of Common Stock could be
used to create voting impediments to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company. Such shares could be sold
privately to purchasers who might side with the Board of Directors in opposing
a takeover bid that the Board determines is not in the best interests of the
Company and its shareholders.
The increase in the authorized but unissued shares of Common Stock also may
have the effect of discouraging an attempt by another person or entity,
through acquisition of a substantial number of shares of Common Stock, to
acquire control of the Company with a view to effecting a merger, sale of
assets or a similar transaction, since the issuance of new shares could be
used to dilute the stock ownership of such person or entity. Shares of
authorized but unissued Common Stock could be issued to a holder who would
thereby have sufficient voting power to assure that any such business
combination or any amendment to the Company's Articles of Incorporation would
not receive the shareholder vote required for approval thereof. The Board of
Directors has no current plans to issue any shares of Common Stock for any
such or other purpose, and does not intend to issue any stock except on terms
or for reason which the Board of Directors deems to be in the best interests
of the Company.
The Common Stock is currently listed on the Nasdaq SmallCap Market, under
the trading symbol SLPT.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
The combination and reclassification of shares of Common Stock pursuant to
the Reverse Stock Split will occur automatically on the Effective Date without
any action on the part of shareholders of the Company and without regard to
the date certificates representing shares of Common Stock prior to the Reverse
Stock Split are physically surrendered for new certificates. If the number of
shares of Common Stock to which a holder is entitled as a result of the
Reverse Stock Split would otherwise include a fraction, the Company will pay
to the shareholder, in lieu of issuing fractional shares of the Company, cash
in an amount equal to the same fraction multiplied by four times the average
closing price of the Common Stock on the Nasdaq SmallCap Market for the five
days immediately preceding the Effective Date. A change in the closing price
of the Common Stock will affect the amount received by shareholders in lieu of
fractional shares.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates for shares of Common Stock to
be used in forwarding such certificates for surrender and exchange for
certificates representing the number of shares of Common Stock such
shareholder is entitled to receive as a consequence of the Reverse Stock
Split. The transmittal forms will be accompanied by instructions specifying
other details of the exchange. Upon receipt of such transmittal form, each
shareholder should surrender the certificates representing shares of Common
Stock prior to the Reverse Stock Split, in accordance with the applicable
instructions. Each holder who surrenders certificates will receive new
certificates representing the whole number of shares of Common Stock that he
holds as a result of the Reverse Stock Split and any cash payable in lieu of a
fractional share. SHAREHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Date, each certificate representing shares of Common
Stock outstanding prior to the Effective Date (an "Old Certificate") will,
until surrendered and exchanged as described above, be deemed, for all
corporate purposes, to evidence ownership of the whole number of shares of
Common Stock, and the right to receive from the Company the amount of cash for
any fractional shares, into which the shares of Common Stock evidenced by such
certificate have been converted by the Reverse Stock Split, except that the
holder of such
11
<PAGE>
unexchanged certificates will not be entitled to receive any dividends or
other distributions payable by the Company after the Effective Date, until the
Old Certificates have been surrendered. Such dividends and distributions, if
any, will be accumulated, and at the time of surrender of the Old
Certificates, all such unpaid dividends or distributions will be paid without
interest.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain material federal income tax
considerations relating to the Reverse Stock Split. This discussion is based
upon the Internal Revenue Code of 1986 (the "Code"), existing and proposed
regulations thereunder, legislative history, judicial decisions, and current
administrative rulings and practices, all as amended and in effect on the date
hereof. Any of these authorities could be repealed, overruled, or modified at
any time. Any such change could be retroactive and, accordingly, could cause
the tax consequences to vary substantially from the consequences described
herein. No ruling from the Internal Revenue Service (the "IRS") with respect
to the matters discussed herein has been requested, and there is no assurance
that the IRS would agree with the conclusions set forth in this discussion.
All shareholders should consult with their own tax advisors.
This discussion may not address certain federal income tax consequences that
may be relevant to particular shareholders in light of their personal
circumstances (such as persons subject to the alternative minimum tax) or to
certain types of shareholders (such as dealers in securities, insurance
companies, foreign individuals and entities, financial institutions, and tax-
exempt entities) who may be subject to special treatment under the federal
income tax laws. This discussion also does not address any tax consequences
under state, local, or foreign laws.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE
TAX LAWS, AND ANY PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any gain, or loss as a result of the
Reverse Stock Split. No gain or loss should be recognized by a shareholder who
receives only Common Stock upon the Reverse Stock Split. A shareholder who
receives cash in lieu of a fractional share of Common Stock that otherwise
would be held as a capital asset generally should recognize capital gain or
loss on an amount equal to the difference between the cash received and the
shareholder's basis in such fractional share of Common Stock. For this
purpose, a shareholder's basis in such fractional share of Common Stock will
be determined as if the shareholder actually received such fractional share.
Except as provided with respect to fractional shares, the aggregate tax basis
of the shares of Common Stock held by a shareholder following the Reverse
Stock Split will equal the shareholder's aggregate basis in the Common Stock
held immediately prior to the Reverse Stock Split and generally will be
allocated among the shares of Common Stock held following the Reverse Stock
Split on a pro-rata basis. Shareholders who have used the specific
identification method to identify their basis in shares of Common Stock
combined in the Reverse Stock Split should consult their own tax advisors to
determine their basis in the post-Reverse Stock Split shares of Common Stock
received in exchange therefor.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the Annual Meeting is required to approve the
amendment of the Company's Articles of Incorporation to effect the Reverse
Stock Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT THE REVERSE STOCK SPLIT.
12
<PAGE>
PROPOSAL NO. 4
CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP to audit the financial
statements of the Company for the year ending December 31, 1998, and
recommends that the shareholders confirm the selection. In the event of a
negative vote, the Board will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements since March
1993. Representatives of Ernst & Young LLP are expected to be present at the
meeting, will have the opportunity to make a statement if they so desire, and
are expected to be available to respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the Annual Meeting is required to approve the
selection of Ernst & Young LLP as the independent auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE CONFIRMATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS FOR FISCAL YEAR ENDING DECEMBER 31, 1998.
13
<PAGE>
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of March 31,
1998 by (i) each shareholder known by the Company to be the beneficial owner
of more than 5% of the Company's Common Stock, (ii) each director, (iii) the
Company's Chief Executive Officer and each of the other executive officers of
the Company other than the Chief Executive Officer whose total salary and
bonus for fiscal year 1997 exceeded $100,000 (together, the "Named Officers")
and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
PERCENT
FIVE PERCENT SHAREHOLDERS, BENEFICIALLY
DIRECTORS AND EXECUTIVE OFFICERS(1) NUMBER OWNED(2)
----------------------------------- --------- ------------
<S> <C> <C>
Charlie Bass(3).......................................... 457,383 5.5%
435 Tasso Street
Suite 325
Palo Alto, CA 94301
Edward M. Esber, Jr.(4).................................. 247,511 3.0%
c/o SoloPoint, Inc.
130-B Knowles Dr.
Los Gatos, CA 95032
Giuliano Raviola(5)...................................... 244,606 2.9%
4C Ventures, Inc.
10261 Bubb Road
Cupertino, CA 95014
Arthur G. Chang(6)....................................... 133,488 1.6%
c/o SoloPoint, Inc.
130-B Knowles Dr.
Los Gatos, CA 95032
Donald Nanneman(7)....................................... 16,250 *
c/o SoloPoint, Inc.
130-B Knowles Dr.
Los Gatos, CA 95032
Ronald J. Tchorzewski(8)................................. 13,489 *
c/o SoloPoint, Inc.
130-B Knowles Dr.
Los Gatos, CA 95032
Patrick Grady(9)......................................... 2,750 *
Borealis Technology Corp.
4070 Silver Sage Drive
Carson City, NV 89701
Charles Ross(10)......................................... 2,750 *
Ameritech Development Corporation
30 South Wacker Drive
Chicago, IL 60606
Brian Kerr............................................... 0 *
c/o SoloPoint, Inc.
130-B Knowles Dr.
Los Gatos, CA 95032
All directors and officers as a group (9 persons)(11).... 1,118,227 13.2%
</TABLE>
- --------
* Less than 1%
14
<PAGE>
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) Applicable percent ownership is based on 8,305,818 shares of Common Stock
outstanding as of March 31, 1998.
(3) Includes 30,628 shares subject to warrants and 2,750 shares subject to
options exercisable within 60 days from March 31, 1998. An aggregate
407,383 shares are held by Bass Associates. Dr. Bass, a director of the
Company, is the controlling General Partner of Bass Associates and may be
deemed to share voting and investment power with respect to those shares.
However, Dr. Bass disclaims beneficial ownership of shares owned by Bass
Associates except to the extent of his pecuniary interest therein.
(4) Includes 27,501 shares subject to options exercisable within 60 days of
March 31, 1998. An additional 200,000 of Mr. Esber's shares are subject
to repurchase options granted to the Company under two separate
agreements. The first agreement grants the Company an option to
repurchase 140,000 of Mr. Esber's shares within 90 days following the
termination of Mr. Esber's employment with the Company. Under the
agreement, one-fourth (35,000) of the shares were released from the
repurchase option on November 26, 1996, and one-forty-eighth
(approximately 2,917) of the shares were released from the repurchase
option on October 26, 1996 and one-forty-eighth of the shares will be
released on the twenty-sixth day of each month thereafter until all of
the shares were released. In the event of a Change of Control of the
Company (as defined in the agreement), an additional number of shares
equal to one-half of the number of shares that have not been released
from the Company's repurchase option as of the closing of such Change in
Control shall become immediately exercisable on the consummation of such
Change in Control. The second agreement grants the Company an option to
repurchase the remaining 60,000 shares within 90 days following the
termination of Mr. Esber's employment with the Company. Under the
agreement, one-forty-eighth (1,250) of the shares were released on June
1, 1996, and an additional one-forty-eighth of the shares are to be
released on the first day of each month thereafter until all of the
shares have been released. The second agreement contains identical Change
of Control provisions as the agreement governing the aforementioned
140,000 shares.
(5) Includes 40,000 shares subject to warrants and 2,750 shares subject to
options exercisable within 60 days from March 31, 1998. An aggregate
241,856 shares are held by 4C Ventures, L.P. Mr. Raviola, a director of
the Company, is a Limited Partner of 4C Associates, L.P., which is the
General Partner of 4C Ventures, L.P. Mr. Raviola may be deemed to be the
beneficial owner of shares owned by 4C Ventures, L.P.
(6) Includes 18,488 shares subject to options exercisable within 60 days from
March 31, 1998. The remaining 115,000 of Mr. Chang's shares are subject
to repurchase options granted to the Company under two separate
agreements. The first agreement grants the Company an option to
repurchase 75,000 of Mr. Chang's shares within 90 days following the
termination of Mr. Chang's employment with the Company. Under the
agreement, one-fourth (18,750) of the shares were released from the
repurchase option on January 1, 1997. One-forty-eighth (approximately
1,563) of the shares were released from the repurchase option on February
1, 1997 and one-forty-eighth of the shares will be released on the first
day of each month thereafter until all of the shares have been released.
In the event of a Change of Control of the Company (as defined in the
agreement), an additional number of shares equal to one-half of the
number of shares that have not been released from the Company's
repurchase option as of the closing of such Change in Control shall
become immediately exercisable on the consummation of such Change in
Control. The second agreement grants the Company an option to repurchase
the remaining 40,000 shares within 90 days following the termination of
Mr. Chang's employment with the Company. Under the agreement, one-forty-
eighth (approximately 833) of the shares were released on June 1, 1996,
and an additional one-forty-eighth of the shares will be released on the
first day of each month thereafter until all shares have been released.
The second agreement contains identical Change of Control provisions as
the agreement governing the aforementioned 75,000 shares.
(7) Includes 16,250 shares subject to options exercisable within 60 days from
March 31, 1998.
(8) Includes 13,489 shares subject to options exercisable within 60 days from
March 31, 1998.
15
<PAGE>
(9) Includes 2,750 shares subject to options exercisable within 60 days from
March 31, 1998. Mr. Grady, a director of the Company, is H.J. Meyers &
Co., Inc's. nominee to the Board of Directors pursuant to agreement with
the Company. See "Certain Relationships and Related Transactions."
(10) Includes 2,750 shares subject to options exercisable within 60 days from
March 31, 1998.
(11) Includes 70,628 shares subject to warrants and 86,728 shares subject to
options exercisable within 60 days from March 31, 1998.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The executive officers of the Company and certain information about them as
of December 31, 1997 are listed below:
<TABLE>
<CAPTION>
NAME AGE COMPANY POSITIONS
---- --- -----------------
<S> <C> <C>
Edward M. Esber, Jr.(1)........... 45 President, Chief Executive Officer and
Director
Arthur G. Chang(2)................ 39 Chief Operating Officer
Ronald J. Tchorzewski............. 47 Chief Financial Officer
Donald Nanneman................... 43 Vice President of Marketing
</TABLE>
- --------
(1) Mr. Esber resigned as President and Chief Executive Officer effective
February 4, 1998 and became Chairman of the Board of the Company as of
such date.
(2) Mr. Chang resigned as Chief Operating Officer effective February 4, 1998
in order to assume the position of President and Chief Executive Officer
of the Company.
Messrs. Esber's and Chang's backgrounds are summarized under "Proposal No.
1-- Election of Directors" above.
Ronald J. Tchorzewski joined the Company in October 1996 as Vice President
of Finance as was elected Chief Financial Officer in July 1997. From July 1996
to October 1996, Mr. Tchorzewski was an independent consultant. From September
1993 to July 1996, Mr. Tchorzewski served as Chief Financial Officer of
ULTRADATA Corporation. From July 1987 to September 1993, Mr. Tchorzewski held
various positions with Cadence Design Systems, Inc., most recently as Vice
President and Corporate Controller. Mr. Tchorzewski holds a bachelor's degree
in accounting from Seton Hall University and a master's degree in finance from
Seton Hall University.
Donald Nanneman joined the Company in January 1997 as Vice President of
Marketing. From March 1992 to December 1996, Mr. Nanneman was Group Marketing
Manager of Octel Communications. Prior to joining Octel, Mr. Nanneman was Vice
President of Sales and Marketing for MediaWorks, a workgroup software
publisher. Prior to Media Works, Mr. Nanneman held marketing management
positions with Apple Computer, Britton Lee and other technology companies.
16
<PAGE>
COMPENSATION TABLES
Summary Compensation Table. The following table sets forth the compensation
paid by the Company to the Chief Executive Officer and each of the other
executive officers of the Company whose total salary and bonus for fiscal year
1997 exceeded $100,000 (collectively the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
FISCAL -------------------- SECURITIES UNDERLYING ALL OTHER
NAME OF PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS# COMPENSATION(2)
-------------------------- ------ ---------- --------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Edward M. Esber, Jr............ 1995 $ 32,637 -- -- --
Chief Executive Officer, 1996 180,000 $ 45,000(1) -- $4,496
President and Director 1997 180,000 72,000(1) 75,000(3) 5,299
Arthur G. Chang................ 1996 104,583 -- -- 4,197
Chief Operating Officer 1997 156,000 18,000(4) 75,000(5) 4,764
Ronald J. Tchorzewski.......... 1996 27,083 -- 25,000(7) --
Chief Financial Officer(6) 1997 130,000 -- 87,500(8) 5,254
Donald Nanneman................ 1997 130,000 -- 90,000(10) 5,299
Vice President of Marketing(9)
Brian Kerr..................... 1996 90,000 -- 80,000(12) 2,200
Vice President of Sales(11) 1997 123,573 -- -- 2,378
</TABLE>
- --------
(1) Represents bonus earned by the Named Officer based upon his performance
in the year noted but credited in the subsequent year against the Named
Officer's indebtedness to the Company. See "Certain Relationships and
Related Transactions."
(2) Consists of life and health insurance premiums paid by the Company.
(3) Pursuant to the Company's 1993 Incentive Stock Plan, an option to
purchase 75,000 shares of Common Stock at a price of $0.875 per share was
granted to Mr. Esber in December 1997. Such option vests on a monthly
basis over a four-year period commencing July 1, 1997. As of December 31,
1997, such option was vested with respect to 9,375 shares of Common
Stock.
(4) Represents bonus earned by the Named Officer based upon his performance
in the year noted but paid in the subsequent year.
(5) Pursuant to the Company's 1993 Incentive Stock Plan, an option to
purchase 75,000 shares of Common Stock at a price of $0.875 per share was
granted to Mr. Chang in December 1997. Such option vests on a monthly
basis over a four-year period commencing July 1, 1997. As of December 31,
1997, such option was vested with respect to 9,375 shares of Common
Stock.
(6) Mr. Tchorzewski joined the Company in October 1996.
(7) Pursuant to the Company's 1993 Incentive Stock Plan, an option to
purchase 25,000 shares of Common Stock at a price of $3.00 per share was
granted to Mr. Tchorzewski in October 1996. Such option was canceled and
regranted at a price of $2.375 in January 1997 and was again canceled and
regranted at a price of $0.875 on December 31, 1997, pursuant to the
Company's stock option exchange program under the Company's 1993
Incentive Stock Plan (see description below). Such option vests on a
monthly basis over a four-year period commencing January 29, 1997. As of
December 31, 1997, such option was vested with respect to 6,250 shares of
Common Stock.
(8) Consists of options to purchase 30,000 shares of Common Stock as original
grants pursuant to the Company's 1993 Incentive Stock Plan and options to
purchase 57,500 shares of Common Stock as regrants of canceled stock
options pursuant to the Company's stock option exchange program. An
option to purchase 7,500 shares of Common Stock was originally granted to
Mr. Tchorzewski at a price of $2.125 per share in July 1997 and was
subsequently canceled and regranted at a price of $0.875 per share in
December 1997. Such option vests at the rate of 1/4th of the shares on
the first anniversary of the original grant date and vests on a monthly
basis over the subsequent three years. An option to purchase 22,500
shares of Common Stock was granted to Mr. Tchorzewski at a price of
$0.875 per share in December 1997. Such option vests on a monthly basis
over a four-year period commencing July 1, 1997. As of December 31, 1997,
both such options were vested with respect to an aggregate 2,813 shares
of Common Stock.
17
<PAGE>
(9) Mr. Nanneman joined the Company in January 1997.
(10) Consists of options to purchase 55,000 shares of Common Stock as original
grants pursuant to the Company's 1993 Incentive Stock Plan and options to
purchase 35,000 shares of Common Stock as regrants of canceled stock
options pursuant to the Company's stock option exchange program. An
option to purchase 35,000 shares of Common Stock was originally granted
to Mr. Nanneman at a price of $1.75 per share in January 1997 and was
subsequently canceled and regranted at a price of $0.875 per share in
December 1997. Such option vests at the rate of 1/4th of the shares on
the first anniversary of the original grant date and vests on a monthly
basis over the subsequent three years. An option to purchase 20,000
shares of Common Stock was granted to Mr. Nanneman at a price of $0.875
per share in December 1997. Such option vests on a monthly basis over a
four-year period commencing July 1, 1997. As of December 31, 1997, both
such options were vested with respect to an aggregate 2,500 shares of
Common Stock.
(11) Mr. Kerr joined the Company in July 1996 and resigned from the Company
effective August 31, 1997.
(12) Pursuant to the Company's 1993 Incentive Stock Plan, an option to
purchase 80,000 shares of Common Stock at a price of $4.25 per share was
granted to Mr. Kerr in June 1996. Such option vested at the rate of 1/4
of the shares on June 27, 1997 and vested at the rate of an additional
1/48 of the shares each month thereafter. Mr. Kerr resigned from the
Company effective August 31, 1997. Mr. Kerr's option was never exercised
and terminated after his resignation from the Company.
Employment Contracts. In October 1995, The Company entered into an
employment agreement with Edward M. Esber, Jr., former President and Chief
Executive Officer and current Chairman of the Board of the Company. Pursuant
to such agreement, Mr. Esber received an annual base salary of $180,000 plus a
performance bonus of up to $72,000 for fiscal 1997. Mr. Esber's bonus for 1997
was credited in the 1998 against the Mr. Esber's indebtedness to the Company.
Pursuant to Mr. Esber's employment agreement, if Mr. Esber's employment is
involuntarily terminated without cause prior to November 1, 1999, Mr. Esber
will continue to receive his base salary and benefits for a period of six
months from the date of termination. See "Certain Relationships and Related
Transactions."
In February 1996, the Company entered into an employment agreement with
Arthur G. Chang, the former Chief Operating Officer and current President and
Chief Executive Officer of the Company. Pursuant to such agreement, Mr. Chang
received an annual salary of $85,000. In 1996, Mr. Chang's annual salary was
increased to $132,000. See "Certain Relationships and Related Transactions."
In October 1996, the Company entered into an employment agreement with
Ronald J. Tchorzewski, the Chief Financial Officer of the Company. Pursuant to
such agreement, Mr. Tchorzewski receives an annual salary of $130,000.
In January 1997, the Company entered into an employment agreement with
Donald Nanneman, the Vice President of Marketing of the Company. Pursuant to
such agreement, Mr. Nanneman receives an annual salary of $130,000.
The Company currently has no other compensatory plan or arrangement with any
of the Named Officers where the amounts to be paid exceed $100,000 and which
are activated upon resignation, termination or retirement of any such
executive officer upon a change in control of the Company.
18
<PAGE>
STOCK OPTION INFORMATION
Option Grants in Last Fiscal Year. The following table sets forth certain
information concerning grants of stock options to each of the Named Officers
during the fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(1) YEAR PER SHARE DATE
---- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Edward M. Esber, Jr................ 75,000 14.0% $0.875 12/31/07
President, Chief Executive Officer
and Director
Arthur G. Chang.................... 75,000 14.0% $0.875 12/31/07
Chief Operating Officer
Ronald J. Tchorzewski.............. 87,500(2) 16.4% $0.875 01/29/07
Chief Financial Officer $2.375 12/31/07
Donald Nanneman.................... 90,000(3) 16.7% $0.875 01/03/07
Vice President of Marketing $ 1.75 12/31/07
Brian Kerr......................... -- -- -- --
Vice President of Sales
</TABLE>
- --------
(1) The options referenced in the foregoing table are intended to be incentive
stock options to the extent permitted by applicable law. The Company's
1993 Amended Incentive Stock Plan (the "Incentive Plan") also provides for
the grant of non-qualified stock options. Incentive stock options may be
granted under the Incentive Plan at an exercise price no less than fair
market value on the date of grant. For so long as the Company's Common
Stock is listed on the Nasdaq National Market, the fair market value is
the closing sale price for the Common Stock. Non-qualified options may be
granted at an exercise price of no less than 85% of fair market value on
the date of grant. Options generally become exercisable as to 25% of the
shares subject to the option one year after the date of grant, and as to
the remainder in equal monthly installments over the succeeding 36 months.
Options generally terminate on the earlier of thirty days after
termination of the optionee's employment by or services to the Company, or
ten years after grant.
(2) Consists of options to purchase 30,000 shares of Common Stock as original
grants pursuant to the Company's 1993 Incentive Stock Plan and options to
purchase 57,500 shares of Common Stock as regrants of canceled stock
options pursuant to the Company's stock option exchange program. An option
to purchase 7,500 shares of Common Stock was originally granted to Mr.
Tchorzewski at a price of $2.125 per share in July 1997 and was
subsequently canceled and regranted at a price of $0.875 per share in
December 1997. Such option vests at the rate of 1/4th of the shares on the
first anniversary of the original grant date and vests on a monthly basis
over the subsequent three years. An option to purchase 22,500 shares of
Common Stock was granted to Mr. Tchorzewski at a price of $0.875 per share
in December 1997. Such option vests on a monthly basis over a four-year
period commencing July 1, 1997. As of December 31, 1997, both such options
were vested with respect to an aggregate 2,813 shares of Common Stock.
(3) Consists of options to purchase 55,000 shares of Common Stock as original
grants pursuant to the Company's 1993 Incentive Stock Plan and options to
purchase 35,000 shares of Common Stock as regrants of canceled stock
options pursuant to the Company's stock option exchange program. An option
to purchase 35,000 shares of Common Stock was originally granted to Mr.
Nanneman at a price of $1.75 per share in January 1997 and was
subsequently canceled and regranted at a price of $0.875 per share in
December 1997. Such option vests at the rate of 1/4th of the shares on the
first anniversary of the original grant date and
19
<PAGE>
vests on a monthly basis over the subsequent three years. An option to
purchase 20,000 shares of Common Stock was granted to Mr. Nanneman at a
price of $0.875 per share in December 1997. Such option vests on a monthly
basis over a four-year period commencing July 1, 1997. As of December 31,
1997, both such options were vested with respect to an aggregate 2,500
shares of Common Stock.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth certain information concerning the
number of options exercised by the Named Officers during the fiscal year ended
December 31, 1997, and the number of shares covered by both exercisable and
unexercisable stock options held by the Named Officers as of December 31,
1997. Also reported are values for "in-the-money" options that represent the
positive spread between the respective exercise prices of outstanding options
and the fair market value of the Company's Common Stock as of December 31,
1997 ($0.875 per share).
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1997 AT DECEMBER 31, 1997
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward M. Esber, Jr..... 0 $ 0 9,375 65,625 $ 0 $ 0
Arthur G. Chang......... 0 0 9,375 65,625 0 0
Ronald J. Tchorzewski... 0 0 9,063 45,937 0 0
Donald Nanneman......... 0 0 2,500 52,500 0 0
Brian Kerr.............. 0 0 0 0 0 0
</TABLE>
BOARD OF DIRECTORS REPORT ON OPTION REPRICING
Because of significant declines in the market value of the Company's Common
Stock in 1997, most of the Company's outstanding options were exercisable at
prices which substantially exceeded the market value of the Common Stock. In
view of such declines in market value and in keeping with the Company's
philosophy of utilizing equity incentive to motivate and retain qualified
employees, the Board of Directors has felt it was important to regain the
incentive intended to be provided by options to purchase shares of the
Company's Common Stock and as such has approved stock option exchange
programs.
In January 1997, the Board of Directors approved a stock option exchange
program (the "Exchange Program"), pursuant to which Ronald J. Tchorzewski, the
Company's Chief Financial Officer and certain other employees holding
incentive stock options and nonstatutory options under the Company's 1993
Incentive Stock Option Plan (the "Incentive Plan") were given the opportunity,
within thirty (30) days of notice of such Exchange Program, to exchange such
options for new options including a new vesting schedule of such new options
as described below.
Under the Exchange Program, holders of stock options on January 29, 1997
which were granted under the Incentive Plan and which had an exercise price
greater than $2.375 per share (the "Old Options") were offered the opportunity
to request that the Company issue new options ("New Options") having an
exercise price equal to $2.375, the fair market value of a share of the
Company's Common Stock on that date (the "Base Exercise Price"). The New
Options vest as follows: each New Option vests at a rate of one-forth-eighth (
1/48) of the total number of shares subject to such New Option per month from
January 29, 1997; provided, however, that each New Option will not be
exercisable for any shares until one year from the original vesting start date
("Vesting Start Date") of the respective Old Option. At any time on or after
one year from such Vesting Start Date, all vested shares subject to such New
Option shall be exercisable.
The New Options modify only the exercise price of the Existing Options to
which each relate and were issued under and are governed by the Incentive Plan
under which such options were originally granted. Other than the different
exercise price and the commencement of a new vesting schedule, the option
agreements relating to the New Options are substantially identical to the
option agreements for the Old Options they replaced.
20
<PAGE>
In December 1997, the Board of Directors approved a second stock option
exchange program (the "Second Exchange Program"), pursuant to which Ronald J.
Tchorzewski, the Company's Chief Financial Officer, Donald Nanneman, the
Company's Vice President of Marketing and certain other employees holding
incentive stock options and nonstatutory options under the Incentive Plan were
given the opportunity, within thirty (30) days of notice of such Second
Exchange Program, to exchange such options for new options. The vesting
schedule for the such new options was unchanged.
Under the Second Exchange Program, holders of stock options on December 31,
1997 which were granted under the Incentive Plan and which had an exercise
price greater than $0.875 per share (the "Second Old Options") were offered
the opportunity to request that the Company issue new options ("Second New
Options") having an exercise price equal to $0.875, the fair market value of a
share of the Company's Common Stock on that date (the "Second Base Exercise
Price"). Each Second New Option is exercisable according to the same vesting
schedule as the corresponding Second Old Option.
The Second New Options modify only the exercise price of the Second Existing
Options to which each relate and were issued under and are governed by the
Incentive Plan under which such options were originally granted. Other than
the different exercise price, the option agreements relating to the Second New
Options are substantially identical to the option agreements for the Second
Old Options they replaced.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1996, Edward M. Esber, Jr., the then Chief Executive Officer,
President, Chief Financial Officer and Director of the Company, and the
Company, entered into a Restricted Stock Purchase Agreement pursuant to which
Mr. Esber bought 140,000 shares of the Company's Common Stock, at a price of
$0.50 per share. These shares are subject to repurchase by the Company, at the
original $0.50 purchase price per share, upon Mr. Esber's cessation of service
prior to vesting in those shares. In conjunction with the share purchase, the
Company loaned $70,000 to Mr. Esber pursuant to a promissory note secured by
the 140,000 shares of restricted Common Stock purchased by Mr. Esber. Mr.
Esber serves pursuant to an employment agreement under which he is entitled to
severance payments. See "Beneficial Security Ownership of Management & Certain
Beneficial Owners" and "Executive Compensation."
In February 1996, Arthur G. Chang, the then Chief Operating Officer of the
Company, and the Company, entered into a Restricted Stock Purchase Agreement
pursuant to which Mr. Chang bought 75,000 shares of the Company's Common
Stock, at a price of $0.50 per share, pursuant to the Incentive Plan. These
shares are subject to repurchase by the Company, at the original $0.50
purchase price per share, upon Mr. Chang's cessation of service prior to
vesting in those shares. In conjunction with the share purchase, the Company
loaned $37,500 to Mr. Chang pursuant to a promissory note secured by the
75,000 shares of restricted Common Stock purchased by Mr. Chang. In addition,
Mr. Chang serves pursuant to an employment arrangement at a current annual
salary of $85,000.
In April 1996, the Board of Directors approved a sale of 60,000 shares of
the Company's Common Stock at a price of $0.50 per share to Mr. Esber pursuant
to a Restricted Stock Purchase Agreement. In May 1996, Mr. Esber executed the
Restricted Stock Purchase Agreement pursuant to which the shares are subject
to repurchase by the Company, at the original $0.50 purchase price per share,
upon Mr. Esber's cessation of service prior to vesting in those shares. In
conjunction with the share purchase, the Company loaned $30,000 to Mr. Esber
pursuant to a promissory note secured by the 60,000 shares of restricted
Common Stock purchased by Mr. Esber.
In April 1996, the Board of Directors approved the sale of 40,000 shares of
the Company's Common Stock at a price of $0.50 per share to Mr. Chang pursuant
to a Restricted Stock Purchase Agreement. In May 1996, Mr. Chang executed the
Restricted Stock Purchase Agreement pursuant to which the shares are subject
to repurchase by the Company, at the original $0.50 purchase price per share,
upon Mr. Chang's cessation of service prior to vesting in those shares. In
conjunction with the share purchase, the Company loaned $20,000 to
21
<PAGE>
Mr. Chang pursuant to a promissory note secured by the 40,000 shares of
restricted Common Stock purchased by Mr. Chang.
In August 1996, as part of its underwriting agreement with H.J. Meyers &
Co., Inc. (the underwriters for the Company's Initial Public Offering), the
Company agreed (for a period of 24 months from the closing of the Initial
Public Offering in August 1996) to grant to H.J. Meyers & Co., Inc. the right
to nominate one member of the Board of Directors. In January 1998, as part of
its underwriting agreement with H.J. Meyers & Co., Inc., with respect to the
Company's secondary public offering, the Company agreed to extend H.J. Meyers
& Co., Inc.'s right to nominate one member of the Board of Directors for a
period of 36 months from the closing of the secondary public offering in
January 1998, provided such nominee is acceptable to the Company.
In March 1997, pursuant to his employment agreement, Mr. Esber elected to
forgive $45,000 of indebtedness to the Company incurred to purchase stock, in
lieu of a $30,000 cash bonus for his performance in 1996. In April 1997, Mr.
Esber elected to have the Company forgive $27,000 of his indebtedness to the
Company incurred to purchase stock, as a one time discretionary bonus, in lieu
of a proposed $18,000 increase in base salary.
Unless otherwise indicated, transactions with affiliates have been made on
terms no less favorable to the Company than those available from unaffiliated
parties. In the future, the Company will continue to seek the most favorable
terms available from both affiliates and nonaffiliates.
RECENT SALES OF UNREGISTERED SECURITIES
In February 1996, a total of 642,855 shares of Series A-7 Preferred Stock
were issued to accredited investors at a price of $5.00 per share for a total
value of $3,214,275. Consideration for the shares consisted of cash
($1,200,500), cancellation of convertible promissory notes ($1,463,770), and
exchange of shares of Series A-6 Preferred Stock. In connection with the
financing, the Company also issued warrants exercisable for a total of
2,442,700 shares of Series A-7 Preferred Stock. The Company relied upon
Section 4(2) as the exemption from the registration requirements of the
Securities Act of 1933, as amended. No underwriters were used and no
commission was paid. See "Certain Relationships and Related Transactions".
In June 1996, pursuant to a bridge loan financing, the Company issued
convertible promissory notes totaling $1,500,000 to Ameritech and 4C Ventures
which automatically converted into shares of Common Stock upon the Company's
IPO. The Company also issued warrants exercisable for a total of 30,000 shares
of common stock at $5.00 per share. The Company relied upon Section 4(2) as
the exemption from the registration requirements of the Securities Act of
1933, as amended. No underwriters were issued and no commission was paid. See
"Certain Relationships and Related Transactions."
LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act, requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership on Form 3 and
changes in ownership on Form 4 or Form 5 with the SEC. Such officers,
directors and 10% shareholders are also required by SEC rules to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 1997, all Section 16(a) filing
requirements applicable to its officers, directors and 10% shareholders were
complied with.
22
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute
and return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
23
<PAGE>
APPENDIX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SOLOPOINT, INC.
I
The name of the Corporation is SoloPoint, Inc.
II
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and Preferred Stock. The total number of
shares of Common Stock the Corporation shall have authority to issue is
35,000,000, and the total number of shares of Preferred Stock the Corporation
shall have authority to issue is 5,000,000. The Preferred Stock may be issued
from time to time in one or more series. The Board of Directors is authorized
to fix the number of shares of any series of Preferred Stock and to determine
or alter the rights, preferences, privileges, and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and, within the
limits and restrictions stated in any resolution or resolutions of the Board
of Directors originally fixing the number of shares constituting any series of
Preferred Stock, to increase or decrease (but not below the number of shares
of any such series then outstanding) the number of shares of any such series
subsequent to the issue of shares of that series.
Effective immediately upon the filing of these Amended and Restated Articles
of Incorporation in the office of the Secretary of State of the State of
California, the outstanding shares of Common Stock shall be and hereby are
combined and reclassified as follows: each share of Common Stock shall be
reclassified as and converted into one-fourth of a share of Common Stock;
provided, however, that fractional shares of Common Stock will not be issued
in connection with such combination and reclassification, and each holder of a
fractional share of Common Stock shall receive in lieu thereof a cash payment
from the Corporation determined by multiplying such fractional share of Common
Stock by four times the arithmetic mean average closing price per share of
Common Stock on the Nasdaq SmallCap Market for the five trading days
immediately preceding the effective date of these Amended and Restated
Articles of Incorporation, such payment to be made upon such other terms and
conditions as the officers of the Corporation, in their judgment, determine to
be advisable and in the best interests of the Corporation.
Certificates representing shares combined and reclassified as provided in
these Amended and Restated Articles of Incorporation are hereby canceled, and,
upon presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive new certificates representing the shares
resulting from such combination and reclassification.
A-1
<PAGE>
IV
The liability of the directors of the Corporation for monetary damages shall
be eliminated to the fullest extent permissible under California law. The
Corporation is also authorized, to the fullest extent permissible under
California law, to indemnify its agents (as defined in Section 317 of the
California Corporations Code), whether by bylaw, agreement or otherwise, for
breach of duty to the Corporation and its shareholders in excess of that
expressly permitted by Section 317 and to advance defense expenses to its
agents in connection with such' matters as they are incurred. If, after the
effective date of this Article, California law is amended in a manner which
permits a corporation to limit the monetary or other liability of its
directors or to authorize indemnification of, or advancement of such defense
expenses to, its directors or other persons, in any such case to a greater
extent than is permitted on such effective date, the references in this
Article to "California law" shall to that extent be deemed to refer to
California law as so amended.
A-2
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SOLOPOINT, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 1998
The undersigned shareholder of SOLOPOINT, INC., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 30, 1998 and hereby appoints
Arthur G. Chang, and Ronald J. Tchorzewski, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Annual Meeting
of Shareholders of SOLOPOINT, INC. to be held on June 2, 1998 at 11:00 a.m.
local time, at 130-B Knowles, Los Gatos, California and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF THE 1993
INCENTIVE STOCK PLAN, FOR THE REVERSE STOCK SPLIT, FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(CONTINUED ON THE OTHER SIDE -- IMPORTANT TO MARK, DATE AND SIGN ON THE OTHER
SIDE.)
<PAGE>
Please mark your vote as indicted [X]
1. ELECTION OF DIRECTORS:
Nominees: Charlie Bass, Edward M. Eaber, Jr., Patrick Grady and Arthur G.
Chang.
FOR WITHHOLD WITHHOLD
all nominees for all authority
listed below nominees to vote
(except as listed for the
indicated below) below following
[_] [_] [_]
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1993 INCENTIVE STOCK PLAN
(THE "INCENTIVE PLAN") TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
UNDER THE INCENTIVE PLAN FROM 897,000 TO 1,397,000 SHARES:
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT A ONE-FOR-FOUR REVERSE STOCK SPLIT OF THE COMPANY'S OUTSTANDING
COMMON STOCK:
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL PERIOD ENDING DECEMBER 31, 1998:
FOR AGAINST ABSTAIN
[_] [_] [_]
Dated:___________________, 1998
_______________________________
Signature of Shareholder
_______________________________
(please print name)
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his or her name appears on the stock certificate(s), and returned promptly in
the enclosed envelope. A corporation is requested to sign its name by its
authorized officer, with the office held designated. Persons signing in a
fiduciary capacity should so indicate. If shares are held by joint tenants or as
community property, both should sign.)
