<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
4a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Integrated Technology USA, 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
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which 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):
------------------------------------------------------------------------
<PAGE>
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[Logo]
INTEGRATED TECHNOLOGY USA, INC.
107 West Tryon Avenue
Teaneck, New Jersey 07666
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
The 1997 Annual Meeting of Stockholders of Integrated Technology USA,
Inc., will be held at the Sheraton Hotel-Newark Airport, 128 Frontage Road,
Newark, New Jersey 07114, on May 29, 1997, at 9:00 a.m. (local time), for the
following purposes:
1. To elect eight members of the Board of Directors of the
Company.
2. To amend the Company's 1996 Stock Option Plan to increase the
number of shares subject thereto.
3. To ratify the appointment of Price Waterhouse LLP as
independent auditors for the fiscal year ending December 31,
1997.
4. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The meeting may be adjourned from time to time and at any reconvened
meeting action with respect to the matters specified in this notice may be taken
without further notice to stockholders except as may be required by the By-laws
of the Company. Stockholders of record at the close of business on April 21,
1997, are entitled to notice of, and to vote on, all matters at the meeting and
any reconvened meeting following any adjournments thereof.
By Order of the Board of Directors,
/s/ Barry L. Eisenberg
Barry L. Eisenberg
Corporate Secretary
April 24, 1997
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
INTEGRATED TECHNOLOGY USA, INC.
107 West Tryon Avenue
Teaneck, New Jersey 07666
April 24, 1997
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Integrated Technology USA, Inc., a Delaware
corporation (the "Company"), of proxies to be voted at its 1997 Annual Meeting
of Stockholders (the "Annual Meeting") to be held at the Sheraton Hotel-Newark
Airport, 128 Frontage Road, Newark, New Jersey 07114, on May 29, 1997, at 9:00
a.m. (local time) and at any adjournment thereof. This Proxy Statement and the
accompanying materials are being mailed on or about April 24, 1997, to holders
of record of common stock, par value $.01 per share ("Common Stock"), of the
Company as of the record date.
The record date for determining stockholders entitled to notice of, and
to vote at, the Annual Meeting has been established as the close of business on
April 21, 1997. On that date, the Company had outstanding and entitled to vote
6,068,212 shares of Common Stock. Holders of record of Common Stock on the
record date will be entitled to one vote for each share held on all matters
properly brought before the Annual Meeting.
The presence at the Annual Meeting, in person or represented by proxy,
of a majority of the outstanding shares of Common Stock entitled to vote thereat
will constitute a quorum for the transaction of business. If a share is deemed
present at the Annual Meeting for any matter, it will be deemed present for all
other matters. Shares held by a nominee for a beneficial owner ("Broker Shares")
that are voted on any matter and abstentions will be included in determining the
number of shares present. Broker Shares that are not voted on any matter will
not be included in determining the number of shares present.
Any stockholder returning the accompanying proxy may revoke such proxy
at any time prior to its exercise by (a) giving written notice to the Company of
such revocation, (b) voting in person at the Annual Meeting or (c) executing and
delivering to the Company a later-dated proxy. Written revocations and
later-dated proxies should be sent to Integrated Technology USA, Inc., 107 West
Tryon Avenue, Teaneck, New Jersey 07666, Attention: Barry L. Eisenberg,
Secretary.
All costs associated with soliciting proxies for the Annual Meeting
will be borne by the Company. Such proxies will be solicited by mail. In
addition, such proxies may be solicited by personal interview, telephone, telex
or facsimile. The Company will, upon request and in accordance with applicable
regulations, reimburse banks, brokerage houses, other institutions, nominees,
and fiduciaries for their reasonable expenses in forwarding solicitation
materials to beneficial owners.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently comprised of the
following eight members: Alan P. Haber, Barry L. Eisenberg, Simon M. Kahn,
Bernard S. Appel, Nicole R. Kubin, Morton L. Landowne, Morris J. Smith and
William Spier. The Board of Directors has nominated the eight current members of
the Board of Directors for election as directors at the Annual Meeting, to hold
office until the 1998 Annual Meeting of Stockholders of the Company or until
their successors are duly elected and have qualified. All nominees have
consented to be named and serve if elected.
Unless a stockholder requests that voting of the proxy be withheld for
any one or more of the nominees for directors by so directing on the proxy card,
the shares represented by the accompanying proxy will be voted FOR election, as
directors, of the above-mentioned eight nominees. If any nominee becomes
unavailable for any reason (which event is not anticipated) to serve as a
director at the time of the Annual Meeting, then the shares represented by such
proxy may be voted for such other person as may be determined by the holders of
such proxy. Directors will be elected at the Annual Meeting by a plurality of
the votes cast (i.e., the eight nominees receiving the greatest number of votes
will be elected as directors).
The following table sets forth certain information concerning the
current nominees for election to the Board of Directors and the executive
officers of the Company:
Name Age Positions
- ------------------------ --- -----------------------------------------
Executive Officers and
Directors
Alan P. Haber 41 Chairman of the Board; President; Chief
Executive Officer and Director
Barry L. Eisenberg 50 Secretary; Treasurer and Director
Simon M. Kahn 40 Executive Vice President; Chief Financial
Officer; Director of Research and
Development and Director
Loren Lemcke 40 Executive Vice President and Chief
Operating Officer
Bernard S. Appel 65 Vice Chairman of the Board and Director
Nicole R. Kubin 43 Director
Morton L. Landowne 49 Director
Morris J. Smith 39 Director
William Spier 63 Director
Alan P. Haber, has been Chairman of the Board, President and Chief
Executive Officer of the Company since its inception in 1990. From 1989 to 1990,
Mr. Haber was Chief Executive Officer of an Israeli subsidiary
2
<PAGE>
of Intafile International Incorporated, a computer research and development
company. Prior to 1989, Mr. Haber founded and served as President of an
import/export company dealing in stationery and entertainment products
(1985-1989) and as President of a company that operated a chain of restaurants
in New York and New Jersey (1979-1985).
Barry L. Eisenberg has been a Director of the Company since 1990 and
Secretary and Treasurer of the Company since 1993. Since 1995, Mr. Eisenberg has
been an active investor and director of private companies in Israel. Prior
thereto, Mr. Eisenberg was, for a period of more than five years, a partner in
the Roseland, New Jersey law firm of Lasser, Hochman, Marcus, Guryan & Kuskin.
Simon M. Kahn became a director of the Company in October 1996 upon
completion of the Company's initial public offering (the "IPO"). Mr. Kahn has
been Executive Vice President and Chief Financial Officer of the Company since
March 1996 and Director of Research and Development of the Company since 1993.
From 1982 to 1992, Mr. Kahn was Chief Financial Officer of Empire Steel Trading
Co., Inc., a metals trading company. Prior thereto, Mr. Kahn was an engineer at
Loral Electronic Systems. Mr. Kahn holds a M.S. degree from the Columbia
University School of Engineering and an M.B.A. degree in corporate finance from
the Columbia University School of Business.
Loren Lemcke joined the Company in February 1997 and currently serves
as Executive Vice President and Chief Operating Officer. For more than five
years prior to joining the Company, Mr. Lemcke held various positions at Acclaim
Entertainment, Inc., including most recently Vice President of Operations.
Bernard S. Appel has been a director of the Company since 1993. Since
1993, Mr. Appel has been President of Appel Associates, a marketing consulting
firm. Prior thereto, for a period of more than five years, Mr. Appel held a
series of positions at Tandy Corporation and its Radio Shack division, including
Senior Vice President of Tandy Corporation and President and Chairman of Radio
Shack. Mr. Appel also serves as a director of Curtis Mathes Holding Corporation.
Nicole R. Kubin became a director of the Company in October 1996 upon
completion of the IPO. Ms. Kubin is President of Cornerstone Capital Advisors, a
corporate advisory firm and, since 1993, Ms. Kubin has been an active investor
and a consultant to public and private companies. For more than two years prior
to 1993, Ms. Kubin was a marketing consultant to various Fortune 500 companies.
Ms. Kubin was formerly Vice President, International Sales for Salomon Brothers,
Inc.
Morton L. Landowne became a director of the Company in October 1996
upon completion of the IPO. Since 1984, Mr. Landowne has been Director of Sales
and Marketing of Plaza Packaging Corp., a manufacturer of set-up boxes for the
cosmetics industry.
Morris J. Smith has been a director of the Company since January 1994.
Since 1993, Mr. Smith has been a private investor and investment consultant.
Prior thereto, Mr. Smith was employed for a period of more than five years by
Fidelity Investments as a portfolio manager.
William Spier became a director of the Company in October 1996 upon
completion of the IPO. Mr. Spier has been a private investor since 1982 and is,
and has been since 1989, the Chairman and President of Sutton Holding Corp., a
private investment company. He also served as Chairman of DeSoto, Inc., a
manufacturer and distributor of cleaning products, from May 1991 through
September 1996, and as Chief Executive Officer of DeSoto, Inc., from May 1991 to
January 1994 and from September 1995 through September
3
<PAGE>
1996. From 1980 to 1981, Mr. Spier was Vice Chairman of Phibro-Salomon Inc. Mr.
Spier also serves as a Director of Keystone Consolidated Industries, Inc.,
Geotek Communications, Inc., EA Industries, Inc., and Video Lottery
Technologies, Inc.
All directors hold office until the next annual meeting of stockholders
or until their successors are elected and qualify. Executive officers hold
office until their successors are chosen and qualify, subject to earlier removal
by the Board of Directors.
In connection with the Company's IPO, the Company agreed that for a
period of three years after October 1, 1996, it would use its best efforts to
cause an individual designated by National Securities Corporation, which acted
as the representative of the underwriters for the IPO, to be elected to the
Company's Board of Directors. Ms. Kubin is currently the individual that has
been designated by National Securities Corporation to be elected to the
Company's Board of Directors.
Information Concerning the Board of Directors and Committees of the Board
The Board of Directors held numerous meetings in 1996, including three
that were held subsequent to completion of the Company's IPO on October 7, 1996.
There are two standing committees of the Board of Directors: the Audit
Committee and the Compensation Committee. The Board of Directors does not have a
nominating committee.
The members of the Audit Committee are Mr. Appel, Mr. Kahn, Ms. Kubin,
Mr. Smith and Mr. Spier. The functions of the Audit Committee include
recommending to the Board of Directors the engagement or discharge of the
Company's independent auditors and reviewing the scope and results of the audits
conducted by such auditors. The Audit Committee was established on October 31,
1996, following completion of the IPO, and held one meeting in 1996.
The members of the Compensation Committee are Mr. Landowne and Mr.
Spier. The functions of the Compensation Committee include establishing and
reviewing employee compensation policies and related matters. The Compensation
Committee was established on October 31, 1996, following completion of the IPO,
and held two meetings in 1996.
Each member of the Board of Directors, with the exception of Mr. Spier,
attended 75% or more of the aggregate of (i) the total number of meetings of the
Board of Directors held in 1996 subsequent to the IPO and (ii) the total number
of meetings held in 1996 subsequent to the IPO by all committees of the Board of
Directors on which the director served.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership (as defined in Item 403 of Regulation S-B under the
Securities Act of 1933) of the Company's Common Stock as of March 31, 1997
(except as indicated in the footnotes to the table) by (i) each person known by
the Company to be the owner of more than 5% of the outstanding shares of the
Common Stock, (ii) each executive officer of the Company named in the Summary
Compensation Table under "Executive and Director Compensation," (iii) each
director of the Company and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Percentage of
Name and Address of Number of Common Shares Common Stock
Beneficial Owner (1) Beneficially Owned (2) Outstanding
- -------------------- ---------------------- -----------
<S> <C> <C>
Mellon Bank Corporation.................... 690,000(3) 11.37%
One Mellon Bank Center
Pittsburgh, PA 15258
Alan P. Haber.............................. 987,272(4) 15.91%
Barry L. Eisenberg........................ 285,039(5) 4.70%
Simon M. Kahn............................. 40,928(6) *
Bernard S. Appel........................... 99,933(7) *
Nicole R. Kubin............................ 4,167(8) *
Morton L. Landowne........................ 11,410(9) *
Morris J. Smith............................ (10) *
William J. Spier........................... 54,669(11) *
All executive officers and directors as
a group (9) persons)....................... 1,483,418(12) 23.40%
</TABLE>
- -----------------
* Less than 1%
(1) Where no address is indicated, the address is c/o the Company.
(2) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table,
a person or group of persons is deemed to have "beneficial ownership"
of any shares as of a given date which such person has the right to
acquire within 60 days after such date. For purposes of computing the
percentage of outstanding shares held by each person or group of
persons named above on a given date, any security which such person or
persons has the right to acquire within 60 days after such date is
deemed to be outstanding for the purpose of computing the percentage
ownership of such person or persons, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person.
(3) The information concerning the number of shares beneficially owned is
as of December 31, 1996 and is based on a Schedule 13G filed by Mellon
Bank Corporation with the Securities and Exchange Commission. Such
Schedule 13G indicates that Mellon Bank Corporation has sole voting
power and shared dispositive power with respect to the indicated
shares. Such Schedule 13G also indicates that 590,000 of the indicated
shares are held through two subsidiaries of Mellon Bank Corporation
(Mellon Bank N.A. and The Dreyfus Corporation).
(4) Consists of (i) 830,771 shares held by Mr. Haber, (ii) 133,111 shares
underlying currently exercisable options held by Mr. Haber, (iii)
21,298 shares held by Mr. Haber's wife and (iv) 2,092 shares underlying
5
<PAGE>
currently exercisable options held by Mr. Haber's wife. Mr. Haber
disclaims any beneficial ownership of any stock owned by his wife.
(5) Consists of (i) 200 currently outstanding shares held by Mr. Eisenberg
and (ii) 284,839 currently outstanding shares held by 241 Associates
LLC, a limited liability company. Shafrira Wiener is the sole manager
of 241 Associates LLC and as such has voting and investment power with
respect to the shares held by 241 Associates LLC. Ms. Wiener is the
daughter of Barry L. Eisenberg. A majority of the ownership interest of
241 Associates LLC is owned by Mr. Eisenberg and his wife and, as a
result of such ownership interests, Mr. Eisenberg may influence the
voting and disposition of the shares of Common Stock held by 241
Associates LLC. Mr. Eisenberg disclaims beneficial ownership of such
shares.
(6) Consists of (i) 7,607 currently outstanding shares held by Mr. Kahn and
(ii) 33,321 shares underlying currently exercisable options held by Mr.
Kahn.
(7) Consists of shares underlying currently exercisable options held by Mr.
Appel.
(8) Consists of shares underlying currently exercisable warrants held by
Ms. Kubin.
(9) Consists of currently outstanding shares held by Landowne & Co., a
corporation controlled by Mr. Landowne.
(10) The Brook Road Nominee Trust, nominee for the Morris Smith Family
Trust, is the owner of 163,653 outstanding shares of Common Stock.
Esther Smith, the mother of Morris J. Smith, is the sole trustee of the
Morris Smith Family Trust and as such has voting and investment power
with respect to such shares. The Morris Smith Family Trust is a
discretionary trust, the potential beneficiaries of which are Mr. Smith
and members of his family. Mr. Smith disclaims any beneficial ownership
of any and all shares owned by the Brook Road Nominee Trust.
(11) Consists of currently outstanding shares held by Mr. Spier.
(12) Does not include 163,653 shares that Mr. Smith disclaims beneficial
ownership of as described in footnote 10 above.
6
<PAGE>
EXECUTIVE AND DIRECTOR COMPENSATION
Executive Compensation
The following table sets forth for the periods indicated information
concerning the compensation earned by the Company's chief executive officer and
one other officer for services rendered in all capacities to the Company. No
other executive officer of the Company received total compensation in excess of
$100,000 in 1994, 1995 or 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation ------------
------------------- Securities
Underlying Other Annual
Name and Principal Position Year Salary($) Options (#) Compensation($)(1)
- ---------------------------------------- ---- --------- ------------ ------------------
<S> <C> <C> <C> <C>
Alan P. Haber........................... 1996 176,614 133,333 34,026
Chairman and Chief
Executive Officer
1995 116,900 -- 2,488
1994 105,047 133,111 2,864
Simon M. Kahn........................... 1996 96,610 66,667 18,021
Executive Vice President; Chief
Financial Officer; Director of
Research and Development
</TABLE>
- -----------------------------
(1) Represents contributions to pension, severance and savings plans.
The following table provides certain information concerning the options
granted in 1996 to the officers named in the Summary Compensation table above.
Option Grants in 1996
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
% of Total
Options
Number of Securities Granted to Exercise Price
Underlying Options Employees Per Expiration
Name Granted in 1996 Share Date
- ------- -------------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Alan P. Haber.................... 133,333(1) 33.3% $6.00 10/1/2001
Simon M. Kahn.................... 66,667(1) 16.7% 6.00 10/1/2001
</TABLE>
- -----------------------------
(1) The indicated options will become exercisable with respect to 50% of
the shares subject thereto on November 30, 1997, and with respect to
the balance of the shares subject thereto on February 28, 1999.
7
<PAGE>
The following table provides certain information concerning the options
held by the officers named in the Summary Compensation table above as of
December 31, 1996.
Options at End of 1996
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Year End Money Options at Year End
------------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Alan P. Haber.. 133,111 133,333 $114,023 --
Simon M. Kahn.. 33,321 66,667 82,970 --
Neither Mr. Haber nor Mr. Kahn exercised any options in 1996.
Compensation of Directors
Each director who is not an employee of the Company is paid $500 for
attendance (in person or by telephone) at meetings of the Board, and all
directors are reimbursed for out-of-pocket expenses incurred in connection with
attendance at Board meetings. In addition, immediately prior to completion of
the IPO in October 1996, the Company granted options to current directors of the
Company (including directors who are executive officers) as follows: Mr. Haber
(options for 133,333 shares), Mr. Eisenberg (options for 66,667 shares), Mr.
Kahn (options for 66,667 shares), Mr. Appel (options for 31,667 shares), Ms.
Kubin (options for 15,000 shares), Mr. Landowne (options for 15,000 shares), Mr.
Smith (options for 31,667 shares) and Mr. Spier (options for 15,000 shares).
Such options have an exercise price per share equal to the $6.00 and vest in two
installments: (one-half in November 1997 and one-half in February 1999).
Since February 1996, Mr. Eisenberg has been providing consulting
services to the Company under an arrangement pursuant to which he is compensated
by the Company at the rate of $80,000 per annum. Such arrangement can be
terminated by the Company or Mr. Eisenberg at any time. Mr. Eisenberg does not
receive any additional compensation for serving as Secretary and Treasurer of
the Company.
Employment Contracts
The Company has entered into an employment agreement with Mr. Haber.
Certain information regarding this agreement is set forth below:
Term. The scheduled term of the agreement commenced upon
completion of the IPO and extends through December 31, 1999. However,
the salary and benefits described below have been paid retroactive to
July 1, 1996.
Base Salary. Base salary is payable at a rate per annum equal
to the New Israeli Shekel equivalent of $190,000 (calculated as of the
date the IPO was completed). Such base salary is linked to the Israeli
cost of living index.
Bonus. The agreement does not provide for a specific bonus,
but contemplates that the Company will adopt a bonus plan based upon
performance goals to be established.
8
<PAGE>
Benefits. The Company is required to (i) pay an amount equal
to 15.83% of Mr. Haber's gross salary to obtain for Mr. Haber a
"manager's insurance policy" (which provides certain severance and
disability benefits and a savings plan), (ii) pay an amount equal to
7.5% of such gross salary into a savings fund for Mr. Haber's benefit,
(iii) provide Mr. Haber with use of an automobile and pay the
maintenance and other expenses related thereto and (iv) pay any taxes
that Mr. Haber may be liable for as a result of receiving any of the
foregoing benefits (other than the car). Upon cessation of Mr. Haber's
employment with the Company for any reason (including resignation or
firing), Mr. Haber has the right to retain the insurance policy,
savings fund and automobile referred to in the preceding sentence
(except that if his employment is terminated for Cause, as defined in
the agreement, he has no right to the automobile). Mr. Haber may, at
his option, agree to forego one or more of the benefits contemplated by
the Employment Agreement. In such event, the Company would be required
(subject to certain exceptions) to increase Mr. Haber's salary by the
amount of the savings (including tax savings) that the Company realizes
as a result of not having to provide such benefit.
Termination Compensation. The Company is required to pay Mr.
Haber specified compensation in the event that (i) at the end of the
term of the agreement, Mr. Haber desires to extend the term and the
Company elects not to do so, (ii) Mr. Haber terminates his employment
with the Company for Good Reason (as defined in the agreement) or (iii)
the Company terminates Mr. Haber's employment for any reason other than
Cause or Disability (as such terms are defined in the agreement). Such
specified compensation consists of (a) a lump-sum payment equal to 150%
of Mr. Haber's annual base compensation in effect in the year during
which the event giving rise to the obligation to make such payment
occurs, (ii) an additional payment in the amount of $25,000 for legal
fees to be used as Mr. Haber sees fit and (iii) payment (not in excess
of $10,000) for an appropriate office for Mr. Haber and his secretary
for a period of six months.
Right of Company to Terminate Employment Agreement. Subject to
the Company's obligation to pay termination compensation to the extent
provided in the preceding paragraph, the Company may terminate Mr.
Haber's employment at any time (i) for Cause or Disability (as defined
in the Employment Agreement) or (ii) at will if such termination is
approved by a two-thirds majority (simple majority after October 1,
1997) of the entire membership of the Board of Directors at a meeting
called and held for such purpose.
The Company has entered into an employment agreement with Mr. Kahn. The
term of the agreement commenced effective November 14, 1996 and continues until
at least December 31, 1997. After such date, either party may terminate the
agreement upon at least 60 days notice. The agreement provides for a minimum
annual salary of $110,000 and certain benefits, including (i) contributions of
approximately 23% of the employee's gross salary to certain severance/disability
and savings plans and (ii) the use of a car.
CERTAIN TRANSACTIONS
During the period April 30, 1996, through July 30, 1996, the Company
completed a bridge financing ("Bridge Financing"). In connection with the Bridge
Financing, the Company issued promissory notes ("Bridge Notes") bearing interest
at a rate of 10% per annum. The Company repaid the Bridge Notes from the net
proceeds of the IPO. In connection with the Bridge Financing, the Company also
issued to each recipient of a Bridge Note a warrant ("Bridge Warrant") to
purchase a number of shares of Common Stock determined by
9
<PAGE>
dividing (i) the aggregate principal amount of the Bridge Note issued to such
recipient by (ii) $6.00 (the initial public offering price per share in the
IPO). Mr. Eisenberg's father-in-law and a brother-in-law of Mr. Eisenberg
purchased $50,000 and $100,000, respectively, of Bridge Notes in the Bridge
Financing on the same terms as the other participants in the Bridge Financing
and received Bridge Warrants based on the foregoing formula. Mr. Eisenberg is a
director and executive officer of the Company.
Certain relatives of Alan P. Haber are employed by the Company. Alan P.
Haber is a director and chief executive officer of the Company and beneficially
owns more than 5% of the outstanding Common Stock of the Company. Philip Haber,
a brother of Alan Haber, has served as warehouse manager since January 1995 and,
in addition, as accounts receivable manager since June 1996. Philip Haber
received compensation of approximately $41,000 in 1995, $43,000 in 1996, and
$12,000 in the first quarter of 1997, and is currently receiving compensation at
a rate per annum of approximately $48,000. Deena Haber, a sister-in-law of Alan
Haber, has served as assistant controller since December 1994. Deena Haber
received compensation of approximately $28,000 in 1995, $40,000 in 1996, and
$13,000 in the first quarter of 1997, and is currently receiving compensation at
a rate per annum of approximately $45,000. Carol Haber, Alan Haber's wife,
serves as a graphic artist. Carol Haber received compensation of approximately
$11,500 in 1995, $14,000 in 1996, and $3,000 in the first quarter of 1997, and
is currently receiving compensation at a rate per annum of approximately
$12,500.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers 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 and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
that they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations from certain of the Company's executive
officers and directors that no other such reports were required, the Company
believes that during the period from January 1, 1996 through December 31, 1996
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with on a timely basis.
PROPOSAL 2
AMENDMENT OF THE COMPANY'S 1996 STOCK OPTION PLAN
General
The Board of Directors of the Company has adopted, subject to
stockholder approval, an amendment (the "Plan Amendment") to the Company's 1996
Stock Option Plan (the "Stock Option Plan") increasing the number of shares
authorized for issuance under such plan from 833,333 to 1,129,000.
As of April 15, 1997, options to purchase approximately 774,166 shares
of Common Stock had been granted under the Stock Option Plan (not including
options that expired unexercised) and were outstanding. None
10
<PAGE>
of the options heretofore granted under the Stock Option Plan have been
exercised. On April 18, 1997, the last reported sale price of the Company's
Common Stock on the American Stock Exchange was $1 1/16 per share.
As of April 15, 1997, the options that had been granted under the Stock
Option Plan since its adoption in July 1996, included:
o the following options granted to executive officers named in
the Summary Compensation Table (under "Executive and Director
Compensation"): 143,333 options granted to Mr. Haber (Chief
Executive Officer); and 76,667 options granted to Mr. Kahn
(Chief Financial Officer);
o an aggregate of 471,667 options granted to all current
executive officers as a group;
o the following options granted to each nominee for election as
a director: Mr. Haber (options for 143,333 shares), Mr.
Eisenberg (options for 76,667 shares), Mr. Kahn (options for
76,667 shares), Mr. Appel (options for 41,667 shares), Ms.
Kubin (options for 25,000 shares), Mr. Landowne (options for
25,000 shares), Mr. Smith (options for 41,667 shares) and Mr.
Spier (options for 25,000 shares);
o an aggregate of 158,334 options granted to all current
directors as a group (excluding directors that are executive
officers); and
o an aggregate of 144,165 options granted to all employees
(excluding executive officers) as a group (excluding options
that expired unexercised).
The adoption of the Plan Amendment by the Board of Directors reflects a
determination by the Board that ensuring the continued availability of a
sufficient number of additional options under the Stock Option Plan would be
beneficial in providing the Board the flexibility to compensate current and
future officers and other employees of the Company in a manner that would
further align the interests of such officers and employees with those of the
Company.
Information Concerning The Plan
Set forth below is certain information concerning the Stock Option
Plan. A copy of the Stock Option Plan is available upon written request to the
Company.
Authorized Shares. The Stock Option Plan provides for the granting of
options to purchase not more than an aggregate of 833,333 shares of Common Stock
(1,129,000 shares if the Plan Amendment is approved), subject to adjustment
under certain circumstances. If any option granted under the Stock Option Plan
expires, terminates or is canceled for any reason without having been exercised
in full, the number of shares as to which such option was not exercised becomes
available for future grants under the Stock Option Plan.
Types of Options. Options granted pursuant to the Stock Option Plan may
be "incentive stock options" ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that are not ISOs
("NSOs"), or both.
Eligibility. ISOs may be granted to employees of the Company and NSOs
may be granted to employees of the Company and to other persons who render
services to the Company. No options may be granted under the Stock Option Plan
after July 29, 2006.
11
<PAGE>
Administration. The Stock Option Plan provides that it shall be
administered by the Board of Directors of the Company or a committee appointed
by the Board of directors.
Option Price. The Board of Directors (or a committee authorized by the
Board) determines the exercise price of each option, subject to the limitations
provided in the Stock Option Plan, including that in the case of an ISO the
exercise price per share may not be less than the fair market value per share of
Common Stock on the date of grant (110% of such fair market value if the grantee
owns stock possessing more than 10% of the combined voting power of all classes
of the Company's stock).
Amendment of the Plan. The Stock Option Plan may be amended from time
to time by the Board of Directors (or a committee authorized by the Board),
subject to certain exceptions specified in the Stock Option Plan.
Federal Income Tax Consequences. In general, no taxable income is
realized by an optionee upon the grant of a NSO. Upon the exercise of a NSO, the
optionee will realize ordinary income equal to the difference between the fair
market value of the Common Stock received by the optionee at the time of
exercise over the exercise price of such option. When the optionee eventually
sells the Common Stock, such optionee is taxed on the difference between the
sale price and his basis in the Common Stock (i.e., the fair market value of the
Common Stock at the time of exercise), as a long or short term capital gain or
loss, as applicable. The Company will be entitled to a deduction equal to the
ordinary income recognized by the optionee at the time the optionee recognizes
such income. If the optionee is subject to Section 16(b) of the Exchange Act,
however, the recognition of income in respect of such exercise may be delayed
until the date upon which the sale of the Common Stock acquired upon such
exercise will not create liability under Section 16(b) of the Exchange Act, and
may be based upon the fair market value at that time, unless the optionee
elects, pursuant to Section 83(b) of the Code to be taxed as of the time of
exercise based on the fair market value at that time.
There are generally no federal income tax consequences to the optionee
at the time an ISO is granted or exercised, other than under the alternative
minimum tax (as described below). When any of the Common Stock received upon
exercise of an ISO is sold, the optionee will realize a capital gain or loss, as
applicable, equal to the difference between the sale price of the Common Stock
sold and the exercise price paid by the optionee for such Common Stock, provided
that (i) the disposition of Common Stock by the optionee is not within two years
after the date of grant of the option or within one year after the transfer of
such Common Stock to the optionee upon exercise, and (ii) the optionee was
employed by the Company at all times from the date of grant of the option until
three months before the date of exercise. Special rules apply in the case of
death or disability. If the conditions described above are satisfied, the
Company will not be entitled to a deduction for Federal income tax purposes upon
the grant or exercise of an ISO. If the above holding period requirements are
not met, the optionee will, in general, recognize ordinary income in the year of
the disqualifying disposition of the Common Stock received upon exercise of the
option. Such ordinary income will be equal to the excess of the fair market
value of the Common Stock on the date of exercise over the exercise price, but
not more than the gain, if any, realized on the disqualifying disposition (sale
price minus exercise price). The Company will be entitled to a deduction equal
to the ordinary income recognized by the optionee at the time the optionee
recognizes such income. If the gain realized on the disqualifying disposition is
greater than the excess of the fair market value over the exercise price, the
difference is taxed as capital gain. If a loss is sustained on the disqualifying
disposition (sale price is less than exercise price), the loss is allowable as a
capital loss.
12
<PAGE>
For purposes of computing the alternative minimum tax, the bargain
element with respect to an ISO (i.e., the excess of the fair market value of the
Common Stock received upon exercise over the exercise price) is generally
included in alternative minimum taxable income upon exercise.
The foregoing discussion is a brief summary of the current federal
income tax consequences of the grant and exercise of stock options under the
Stock Option Plan based on the relevant provisions of the Code. The description
is necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations and
applications which may vary in individual circumstance.
Required Approval
The approval of the proposed Plan Amendment requires the affirmative
vote of a majority of the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote on the matter. Abstentions will have the
same effect as a vote against the proposed Plan Amendment, whereas broker
non-votes and shares not represented at the Annual Meeting will not be counted
for purposes of determining whether the matter has been approved.
The Board of Directors recommends that the stockholders vote FOR the
Plan Amendment (designated as Proposal 2 on the enclosed proxy card) increasing
the number of shares authorized for issuance under the Stock Option Plan from
833,333 to 1,129,000.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has reappointed Price Waterhouse LLP as
independent auditors to audit the financial statements of the Company for 1997,
subject to ratification by the stockholders.
In the event that the stockholders fail to ratify this reappointment,
other certified public accountants will be considered upon recommendation of the
Audit Committee. Even if this reappointment is ratified, the Board of Directors,
in its discretion, may direct the appointment of a new independent accounting
firm at any time during the year, if the Board believes that such a change would
be in the best interest of the Company and its stockholders.
A representative of Price Waterhouse LLP is expected to be present at
the Annual Meeting with an opportunity to make a statement if he/she so desires
and will be available to respond to appropriate questions.
Required Approval
Ratification of the reappointment of Price Waterhouse LLP as
independent auditors to audit the financial statements of the Company for 1997
requires the affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the matter.
Abstentions will have the same effect as a vote against such ratification,
whereas broker non-votes and shares not represented at the Annual Meeting will
not be counted for purposes of determining whether such ratification has been
approved.
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<PAGE>
The Board of Directors recommends that the stockholders vote FOR such
ratification (designated as Proposal 3 on the enclosed proxy card).
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Stockholders may present proposals for inclusion in the Company's proxy
statement relating to its 1998 Annual Meeting of Stockholders provided that (in
addition to other applicable requirements) such proposals are received by the
Company in writing at its principal executive offices no later than December 25,
1997.
OTHER MATTERS
The Board of Directors of the Company does not know of any matter to be
presented for action at the Annual Meeting other than the proposals described
herein. If any other matters not described herein should properly come before
the Annual Meeting for stockholder action, it is the intention of the persons
named in the accompanying proxy to vote, or otherwise act, in respect thereof in
accordance with the Board of Directors' recommendations.
ANNUAL REPORT
A copy of the Company's 1996 Annual Report, covering the fiscal year
ended December 31, 1996, including audited financial statements, is enclosed
with this Proxy Statement. Such report is not incorporated in this Proxy
Statement and is not a part of the proxy soliciting material.
By Order of the Board of Directors,
/s/ Barry L. Eisenberg
BARRY L EISENBERG,
Corporate Secretary
<PAGE>
INTEGRATED TECHNOLOGY USA, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Alan P. Haber, Barry L. Eisenberg and
Simon M. Kahn or any of them with full power of substitution, proxies to vote at
the Annual Meeting of Stockholders of Integrated Technology USA, Inc. (the
"Company") to be held on May 29, 1997 at 9:00 a.m., local time, and at any
adjournment or adjournments thereof, hereby revoking any proxies heretofore
given, all shares of Common Stock of the Company held or owned by the
undersigned as directed below, and in their discretion upon such other matters
as may come before the meeting.
(To be Signed on Reverse Side)
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PROPOSAL, THIS PROXY
WILL BE VOTED FOR SUCH PROPOSAL.
|X| Please mark your votes
as in this example.
1. Election of For withheld Nominees:
Directors | | | | Alan P. Haber
Barry L. Eisenberg
Simon M. Kahn
Bernard S. Appel
Nicole R. Kubin
Morton L. Landowne
Morris J. Smith
William J. Spier
For, except vote withheld from the following nominees:
- --------------------------------------------------------------------------------
2. Approval of Amendment to 1996 Stock For Against Abstain
Option Plan | | | | | |
3. Ratification of Appointment of Independent For Against Abstain
Auditors | | | | | |
SIGNATURES(S) DATE
------------------------------------------ -----------------
NOTE: Please sign exactly as name appears hereon, joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
<PAGE>
INTEGRATED TECHNOLOGY USA, INC.
1996 STOCK OPTION PLAN
1. Purpose.
The purpose of the Integrated Technology USA, Inc., 1996 Stock Option
Plan (the "Plan") is to encourage and enable employees (which term, as used
herein, shall include officers), and directors of Integrated Technology USA,
Inc., or a parent (if any) or subsidiaries thereof (collectively, unless the
context otherwise requires, the "Company"), consultants, and advisors to the
Company, and other persons or entities providing goods or services to the
Company to acquire a proprietary interest in the Company through the ownership
of common stock of the Company ("Stock"). (Such directors, consultants,
advisors, and other persons or entities providing goods or services to the
Company and entitled to receive options hereunder being collectively referred to
as the "Associates," and the relationship of the Associates to the Company being
referred to as "association with" the Company.) Such ownership will provide such
employees and Associates with a more direct stake in the future welfare of the
Company and encourage them to remain employed by or associated with the Company.
It is also expected that the Plan will encourage qualified persons to seek and
accept employment or association with the Company.
2. Type of Options.
Options granted pursuant to the Plan may (subject to the following two
sentences) be incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986 (as from time to time amended, the "Code") (any option that
is intended so to qualify as an incentive stock option being referred to herein
as an "incentive option"), or options that are not incentive options, or both.
Incentive options may only be granted to "employees" as defined in the
provisions of the Code or regulations thereunder applicable to incentive stock
options. In the event that the Plan is not approved by the stockholders of the
Company in the manner and within the time frame required by the Code for
incentive options, then any options designated as incentive options shall
instead be treated as options that are not incentive options.
3. Effective Date and Term of Plan.
The Plan became effective upon being approved by the Board of Directors
of the Company (the "Board") on July 29, 1996. No option may be granted under
the Plan after July 29, 2006, but options previously granted may extend beyond
that date.
4. Administration.
(a) Subject to the following sentence, the Plan shall be administered
by the Board. The Board may delegate any and all of its authority and
administrative powers and functions under the Plan to one or more committees of
two or more directors appointed from time to time by the Board. Each such
committee to which any duties or authority is delegated as aforesaid is referred
to herein as a "Committee". If there are multiple Committee, the authority,
powers and functions delegated to each Committee may be different or the same.
Unless otherwise provided by the Board resolution establishing a Committee, (i)
a majority of the members of a Committee shall constitute a quorum, (ii) all
determinations of the Committee shall be made by a majority of its members and
(iii) any determination of the Committee may be made, without notice or meeting
of the Committee, by a writing signed by a majority of the Committee members.
Each reference herein to the "Plan
<PAGE>
Administrator" with respect to any authority, power or function shall mean the
Board and/or any Committee to which the Board has delegated the power to
exercise such authority or power or to perform such function, as the case may
be.
(b) The Plan Administrator shall have authority, not inconsistent with
the express provisions of the Plan, (i) to grant options to such eligible
employees and Associates of the Company as the Plan Administrator may select;
(ii) to determine the time or times when options shall be granted and the number
of shares of Stock subject to each option; (iii) to determine which options are,
and which options are not, incentive options; (iv) to determine the terms and
conditions of each option; (v) to prescribe the form or forms of instruments
evidencing options and any other instruments required under the Plan and to
change such forms from time to time; (vi) to adopt, amend and rescind rules and
regulations for the administration of the Plan; and (vii) to interpret the Plan
and to decide any questions and settle all controversies and disputes that may
arise in connection with the Plan. Any determination, decision or action of the
Plan Administrator in connection with the construction, interpretation,
administration or application of the Plan shall be final and conclusive on all
persons participating in the Plan.
5. Shares Subject to the Plan.
(a) Number of Shares.
Subject to adjustment as provided in Section 8, the aggregate number of
shares of Stock that may be delivered upon the exercise of options granted under
the Plan shall be 833,333. If any option granted under the Plan terminates
without having been exercised in full, the number of shares of Stock as to which
such option was not exercised shall be available for future grants within the
limits set forth in this Section 5(a).
(b) Shares to be Delivered.
Shares delivered under the Plan shall be authorized but unissued Stock
or if the Plan Administrator so decides in its sole discretion, previously
issued Stock acquired by the Company and held in treasury. No fractional shares
of Stock shall be delivered under the Plan.
6. Eligibility for Options.
Options may be granted to such Employees and Associates of the Company
as the Plan Administrator shall from time to time select (subject to the second
sentence of Section 2 hereof). Receipt of options under the Plan or of awards
under any other employee benefit plan of the Company shall not preclude an
employee from receiving options or additional options under the Plan.
7. Terms and Conditions of Options.
(a) Special Rule for Incentive Options. Consistent with Section 422 of
the Code and any regulations, notices or other official pronouncements of
general applicability, to the extent the aggregate fair market value (determined
in accordance with Section 7(b) as of the time the option is granted) of the
shares of Stock with respect to which incentive options are exercisable for the
first time by the optionee during any calendar year (under all plans of his
employer corporation and its
2
<PAGE>
parent and subsidiary corporations) exceeds $100,000, such options shall not be
treated as incentive options. Nothing in this special rule shall be construed as
limiting the exercisability of any option, unless the Plan Administrator
expressly provides for such a limitation at time of grant.
(b) Exercise Price. The exercise price of each option shall be
determined by the Plan Administrator, subject to the following: (i) in the case
of an incentive option, the exercise price per share of stock shall not be less
than 100% (110% for a stock option granted to a greater than ten-percent
shareholder) of the fair market value per share of Stock at the time the option
is granted and (ii) in the case of all options, the exercise price per share of
Stock shall not be less than the par value per share (unless the Stock subject
to the option is treasury stock). A "greater than ten-percent shareholder" shall
mean for purposes of the Plan any employee who at the time of grant owns
directly, or is deemed to own by reason of the attribution rules set forth in
Section 424(d) of the Code, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company. The fair market value of a
share of Stock as of any date shall be determined for purposes of the Plan as
follows: (i) if the Stock is listed on a securities exchange or quoted through
the Automated Quotation National Market System of the National Association of
Securities Dealers, Inc. ("NASDAQ"), the fair market value shall equal the mean
between the high and low sales prices on such exchange or through such market
system, as the case may be, on such day or in the absence of reported sales on
such day, the mean between the closing reported bid and asked prices on such
exchange or through such market system, as the case may be, on such day, (ii) if
the Stock is not listed or quoted as described in the preceding clause but is
quoted through NASDAQ (but not through the National Market System), the fair
market value shall equal the mean between the closing bid and asked prices as
quoted by the National Association of Securities Dealers, Inc., through NASDAQ
for such day and (iii) if the Stock is not listed or quoted on a securities
exchange or through NASDAQ, then the fair market value shall be determined by
such other method as the Plan Administrator determines to be reasonable and
consistent with applicable requirements of the Code and the regulations issued
thereunder applicable to incentive options; provided, however, that if pursuant
to clause (i) or (ii) fair market value is to be determined based upon the mean
of bid and asked prices and the Plan Administrator determines that such mean
does not properly reflect fair market value, then fair market value shall be
determined by the Plan Administrator as provided in clause (iii).
(c) Duration of Options. An option, shall be exercisable during such
period or periods as the Plan Administrator may specify. The latest date on
which an option may be exercised (the "Final Exercise Date") shall be the date
which is ten years (five years, in the case of an incentive option granted to a
"greater than ten-percent shareholder" as defined in Section 7(b)) from the date
the option was granted or such earlier date as may be specified by the Plan
Administrator at the time the option is granted.
(d) Exercise of Options.
(1) At the time of the grant of an option, the Plan Administrator
shall specify whether the option shall be exercisable in full
at any time prior to the Final Exercise Date or in
installments (which may be cumulative or noncumulative). In
the case of an option not
3
<PAGE>
immediately exercisable in full, the Plan Administrator may at
any time accelerate the time at which all or any part of the
option may be exercised.
(2) The award forms or other instruments evidencing incentive
options shall contain such provisions relating to exercise and
other matters as are required of incentive options under the
applicable provisions of the Code and the regulations
thereunder, as from time to time in effect.
(3) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (a) the option certificate and any other
documents required by the Plan Administrator and (b) payment
in full for the number of shares for which the option is
exercised.
(4) In the case of an option that is not an incentive option, the
Plan Administrator shall have the right to require that the
individual exercising the option remit to the Company an
amount sufficient to satisfy any federal, state, or local
withholding tax requirements (or make other arrangements
satisfactory to the Company with regard to such taxes) prior
to the delivery of any Stock pursuant to the exercise of the
option. In the case of an incentive option, if at the time the
option is exercised the Plan Administrator determines that
under applicable law and regulations the Company could be
liable for the withholding of any federal, state or local tax
with respect to a disposition of the Stock received upon
exercise, the Plan Administrator (i) shall require as a
condition of exercise that the individual exercising the
option agree to inform the Company promptly of any disposition
(within the meaning of Section 424(c) of the Code and the
regulations thereunder) of Stock received upon exercise, and
(ii) may require as a condition of exercise that the
individual exercising the option give such security as the
Plan Administrator deems adequate to meet the potential
liability of the Company for the withholding of tax, and to
augment such security from time to time in any amount
reasonably deemed necessary by the Plan Administrator to
preserve the adequacy of such security.
(5) If an option is exercised by the executor or administrator of
a deceased employee or Associate, or by the person or persons
to whom the option has been transferred by the employee's or
Associate's will or the applicable laws of descent and
distribution or otherwise, the Company shall be under no
obligation to deliver Stock pursuant to such exercise until
the Company is satisfied as to the authority of the person or
persons exercising the option.
(e) Termination of Employment.
An employee's options shall terminate immediately upon the termination
of his employment with the Company, subject to the following exceptions: (i) if
the termination is by reason of the death or disability of the employee, the
unexercised portion of such options shall continue to be exercisable
4
<PAGE>
for 12 months after such termination (but only to the extent, if any, that such
options were exercisable immediately prior to the date of such termination) and
(ii) if the termination is for any other reason, excluding termination for
cause, the unexercised portion of such options shall continue to be exercisable
for three months after such termination (but only to the extent, if any, that
such options were exercisable immediately prior to the date of such
termination); provided, however, that the foregoing right of an option holder to
exercise options following termination of employment is subject to the condition
that the option holder shall not have conducted himself during the term of his
employment or thereafter in a manner which adversely affects the Company.
Notwithstanding the foregoing, the Plan Administrator in its discretion in any
particular case may provide that upon termination of an employee's employment
with the Company, the unexercised portion of his options shall continue to be
exercisable for a longer or shorter period than the period provided for in the
preceding sentence; provided, however, that (i) in the case of an incentive
option, the Plan Administrator may not provide for a shorter or longer period
after the option is granted and, in any event, may not provide for a longer
period except in the case where the employee's employment is terminated by
reason of death and (ii) in the case of an option that is not an incentive
option, the Plan Administrator may not provide for a shorter period after the
option is granted. For purposes of this Section 7(e), employment shall not be
considered terminated (i) in the case of sick leave or other bona fide leave of
absence approved for purposes of the Plan by the Plan Administrator, so long as
the employee's right to reemployment is guaranteed either by statute or by
contract, or (ii) in the case of a transfer of employment between the Company
and a subsidiary or between subsidiaries, or to the employment of a corporation
(or a parent or subsidiary corporation of such corporation) issuing or assuming
an option in a transaction to which Section 424(a) of the Code applies.
(f) Payment for Stock.
Stock purchased under the Plan upon exercise of an option shall be paid
for as follows:
(i) in cash or by certified check or bank draft or money order
payable to the order of the Company; or
(ii) with the consent of the Plan Administrator and to the
extent permitted by it (not later than the time of grant, in the case
of an incentive option) as follows:
(A) through the delivery of shares of Stock having a fair
market value (determined as provided in Section 7(b)) on the
date of exercise equal to the purchase price (but only if such
shares have been held by the option holder for a period of
time sufficient to prevent a pyramid exercise that would
create a charge to the Company's earnings); or
(B) by delivery of a full recourse interest bearing promissory
note of the option holder to the Company, secured by a pledge
of the Stock being purchased, such note to be payable in the
case of an incentive option, on such terms as are specified in
the option (except that, in lieu of a stated rate of interest,
an incentive option may provide that
5
<PAGE>
the rate of interest on the note will be such rate as is
sufficient, at the time the note is given, to avoid the
imputation of interest under the applicable provisions of the
Code); provided, that if the Stock delivered upon exercise of
the option is an original issue of authorized Stock, at least
so much of the exercise price as represents the par value of
such Stock shall be paid in cash or by a combination of cash
and Stock; or
(C) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to sell shares
acquired upon exercise of the option and promptly to deliver
to the Company a portion of the proceeds thereof equal to the
exercise price, or
(D) any combination of any of the foregoing payment methods
provided for in this Section 7(f).
(g) Delivery of Stock.
An option holder shall not have the rights of a stockholder with regard
to awards under the Plan except as to Stock actually received by him under the
Plan. The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(h) Nontransferability of Options.
No option may be transferred other than by will or by the laws of
descent and distribution, and during the lifetime of the employee or Associate
to whom granted may be exercised only by him; provided, however, that an option
that is not an incentive option may be otherwise transferred to the extent, if
any, permitted by the Plan Administrator.
(i) Restrictions on Stock.
The Plan Administrator may provide that shares of Stock purchased
through the exercise of options under the Plan be subject to such restrictions
on resale, including restrictions requiring resale to the Company at or below
fair market value, or such other restrictions, as the Plan Administrator in its
sole discretion shall determine, and shall take such steps as it deems necessary
or appropriate to carry out the purposes of any such restriction; provided,
however, that any such restrictions relating to the shares of Stock that may be
purchased upon exercise of an option may not be provided for after
6
<PAGE>
the option has been granted.
8. Mergers, Recapitalizations. Etc.
(a) In the event of a consolidation or merger in which the Company is
not the surviving corporation or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or other transfer of substantially all of
the Company's assets (all the foregoing being referred to as "Acquisition
Events"), then the Plan Administrator may in its discretion terminate all
outstanding options by delivering notice of termination to each option holder;
provided, however, that, during the 20-day period following the date on which
such notice of termination is delivered, each option holder shall have the right
to exercise in full all of his options that are then outstanding (without regard
to any condition with respect to the exercise of any installment that relates to
the passage of time). If an Acquisition Event occurs and the Plan Administrator
does not terminate the outstanding options pursuant to the preceding sentence,
then the provisions of Section 8(b) shall apply.
(b) In the event that the outstanding shares of Stock are changed into
or exchanged for a different number or kind of shares or other securities or
property (including cash) of the Company or of another corporation by reason of
a stock dividend, stock split or combination of shares (excluding the stock
split effected by the Company on September 10, 1996), recapitalization or other
change in the Company's capital stock, reorganization, merger, sale or other
transfer of substantially all the Company's assets to another corporation,
consolidation, or other transaction described in Section 424(a) of the Code, the
Plan Administrator shall make appropriate adjustments (in such manner as it
deems equitable in its sole discretion) in (i) the number and kind of shares of
Stock, other securities or property for the purchase of which options may be
granted under the Plan, (ii) the number and kind of shares of Stock, other
securities or property as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, (iii) the exercise price and other terms of
outstanding options and (iv) any other relevant provisions of the Plan. Any
adjustment of the Plan or in outstanding options shall be effective on the
effective date of the event giving rise to such adjustment. The Plan
Administrator may also adjust the number of shares subject to outstanding
options, the exercise price of outstanding options and the terms of outstanding
options to take into consideration any other event (including, without
limitation, accounting changes) if the Plan Administrator determines that such
adjustment is appropriate to avoid distortion in the operation of the Plan. All
determinations and adjustments made by the Plan Administrator pursuant to this
Section 8(b) shall be binding on all persons.
(c) The Plan Administrator may grant options under the Plan in
substitution for options held by employees of another corporation who
concurrently become employees of the Company or a subsidiary of the Company as
the result of a merger or consolidation of the employing corporation with the
Company or a subsidiary of the Company, or as the result of the acquisition by
the Company of property or stock of the employing corporation. The Company may
direct that substitute awards be granted on such terms and conditions as the
Plan Administrator considers appropriate in the
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circumstances.
9. Limitation on Rights.
Neither the adoption of the Plan nor the grant of options shall confer
upon any employee any right to continued employment with the Company or affect
in any way the right of the Company to terminate the employment of an employee
at any time. Except as specifically provided by the Plan Administrator in any
particular case, the loss of existing or potential profit in options granted
under this Plan shall not constitute an element of damages in the event of
termination of the employment of an employee even if the termination is in
violation of an obligation of the Company to the employee by contract or
otherwise.
10. Effect, Discontinuance, Cancellation, Amendment and Termination.
(a) Neither adoption of the Plan nor the grant of options to an
employee shall affect the Company's right to grant to such employee options that
are not subject to the Plan, to issue to such employees Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to employees.
(b) The Plan Administrator may at any time discontinue granting options
under the plan. With the consent of the option holder, the Plan Administrator
may at any time cancel an existing option in whole or in part and grant the
option holder another option for such number of shares as the Plan Administrator
specifies. The Plan Administrator may at any time or times amend the Plan,
provided that (i) no such amendment shall affect the rights of any option holder
(without his consent) under any option previously granted, and (ii) without the
approval of the stockholders of the Company, no such amendment shall (a)
increase the maximum number of shares available under the Plan for delivery
pursuant to the exercise of incentive options, (b) change the group of employees
eligible to receive incentive options, (c) reduce the price at which incentive
options may be granted, (d) extend the time within which incentive options may
be granted, (e) alter the Plan in such a way that incentive options already
granted hereunder would not be considered incentive stock options under Section
422 of the Code, or (f) amend the provisions of this Section 8(b). The Plan
Administrator may at any time terminate the Plan as to any further grants of
options.
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