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Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] 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 Rule 14a-11(c) or Rule 14a-12
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BASE TEN SYSTEMS, INC.
(Name of Registrant as Specified in its Charter
and
Name of Person Filing Proxy Statement)
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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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing with 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: __________________________________________________
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<PAGE>
May 17, 2000
BASE TEN SYSTEMS, INC.
One Electronics Drive
P.O. Box 3151
Trenton, New Jersey 08619
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2000
To the Shareholders:
The Annual Meeting of Base Ten Systems, Inc. (the
"Company") will be held at the Company's offices at One Electronics Drive,
Trenton, New Jersey, 08619, on Wednesday, May 31, 2000 at 11:00 a.m. for the
following purposes:
(1) The election of two directors to the Board of Directors, one
director to be elected for a one-year term and one director to be
elected for a three-year term.
(2) Proposal 1: The approval of a proposed increase in the authorized
Class A Common Stock from 12,000,000 shares to 27,000,000 shares.
(3) Proposal 2: The approval of the amendment to the 1998 Stock Option
and Stock Award Plan.
(4) Proposal 3: The approval of the amendment to the 1998 Director Stock
Option Plan.
Shareholders of the Company of record at the close of
business on May 11, 2000 will be entitled to notice of and to vote at the Annual
Meeting or any adjournments or postponements thereof.
By order of the Board of Directors,
WILLIAM F. HACKETT
Secretary
Your vote is important, regardless of how many shares you own.
To vote your shares, please mark, sign and date the accompanying proxy card
and mail it promptly in the enclosed return envelope.
<PAGE>
BASE TEN SYSTEMS, INC.
One Electronics Drive
P.O. Box 3151
Trenton, New Jersey 08619
PROXY STATEMENT
Annual Meeting of Shareholders to be held May 31, 2000
General
This Proxy Statement is being furnished in connection with
the solicitation of proxies on behalf of the Board of Directors (the "Board") of
Base Ten Systems, Inc. (the "Company"), to be voted at the Annual Meeting of
Shareholders scheduled to be held at the Company's offices at One Electronics
Drive, Trenton, New Jersey 08619 on Wednesday, May 31, 2000 and any adjournments
or postponements thereof (the "Annual Meeting"). This Proxy Statement and the
enclosed form of proxy are being first mailed to shareholders on or about May
17, 2000. Upon request, additional copies of the proxy materials will be
furnished without cost to brokers and other nominees for forwarding to
beneficial owners of shares held in their names.
There are four matters to be considered and voted on at the
Annual Meeting, as set forth in the accompanying Notice of Annual Meeting.
Shareholders of record as of the close of business on May 11, 2000, are entitled
to notice of and to vote at the Annual Meeting. As of May 11, 2000, there were
5,107,540 shares of the Company's Class A Common Stock, 12,631 shares of the
Company's Class B Common Stock, and 15,203.66584473 shares of the Company's
Series B, Convertible Preferred Stock (the "Series B Preferred Stock") issued
and outstanding.
Each share of Class A Common Stock, Class B Common Stock
and Series B Preferred Stock (at its Class A Equivalence, as defined below) is
entitled to one vote on all matters. The holders of Class A Common Stock, Class
B Common Stock and Series B Preferred Stock vote together as one class. The
holders of Series B Preferred Stock have the same voting rights on all matters
as the holders of Class A Common Stock, calculated as if all shares of Series B
Preferred Stock had been converted into shares of Class A Common Stock on the
record date for any such vote, subject to limitations applicable to certain
holders. On May 11, 2000, the record date for the Annual Meeting, each share of
Series B Preferred Stock, subject to such limitations, was convertible into 50
shares of Class A Common Stock (the "Class A Equivalence"). A majority of the
outstanding shares of the Company entitled to vote, represented in person or by
proxy, will constitute a quorum at the Annual Meeting.
<PAGE>
All properly executed proxies received prior to the Annual
Meeting will be voted in accordance with the instructions marked on the proxy
cards. If no instructions are provided, it is the intention of the persons named
in the enclosed proxy to vote FOR the election of director nominees and FOR each
of the proposals described in the Notice of Annual Meeting, and, with respect to
any other matter as may be properly presented at the Annual Meeting, in
accordance with their best judgment. A shareholder giving a proxy may revoke it
at any time by giving written notice of revocation to the Secretary of the
Company before the proxy is voted, by executing a proxy bearing a later date and
delivering it to the Secretary of the Company prior to the earlier proxy being
voted, or by attending the Annual Meeting, notifying the Secretary at the Annual
Meeting before the vote is taken to revoke the proxy, and voting in person.
Abstentions and broker non-votes are counted for purposes of determining the
number of shares represented at the Annual Meeting for purposes of determining a
quorum, but are not deemed to be votes cast concerning a proposal. Broker
non-votes occur when a broker nominee (which has voted on one or more matters at
the Annual Meeting) does not vote on one or more other matters at the Annual
Meeting because it has not received instructions to so vote from the beneficial
owner and does not have discretionary authority to vote.
The cost of soliciting any proxies will be borne by the
Company. The Company will reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding proxy
materials to beneficial owners. Proxies may be solicited by the Company's
directors, officers and regular employees, without additional compensation, in
person or by telephone or telecopier.
Recent Developments
On April 28, 2000, Clark L. Bullock, a director of the
Company, sent notice to the Company of his intention to resign from the Board of
Directors, which the Company deems effective as of such date.
On April 11, 2000, Alexander Adelson resigned from the
Board of Directors for personal reasons. On April 11, 2000, the Board elected
Stephen A. Cloughley as a director to fill the vacancy on the Board created by
Mr. Adelson's resignation.
On March 31, 2000, the Company entered into an agreement
with Robert J. Bronstein, the President of the Company's Clinical Software
Solutions Division, by which Mr. Bronstein resigned as an officer and an
employee of the Company, effective April 1, 2000 (the "Bronstein Termination
Agreement"). Pursuant to the terms of the Bronstein Termination Agreement, the
Employment Agreement, dated as of June 11, 1999, between the Company and Mr.
Bronstein (the "Bronstein Employment Agreement") and the Change in Control
Agreement, dated as of June 11, 1999, between the Company and Mr. Bronstein,
were each terminated, provided that Mr. Bronstein shall continue to be bound by
the obligations prohibiting disclosure of confidential information contained in
the Bronstein Employment Agreement. The Bronstein Termination Agreement provides
that Mr. Bronstein, among other things, shall (i) receive a lump sum termination
payment of $200,000, (ii) serve as a consultant to the Company from the date of
termination until October 1, 2000 (the "Bronstein Consultation Term"), for which
the Company has deposited $60,000 in escrow, out of which Mr. Bronstein shall
receive payment of $10,000 per month as compensation for consultation services
provided by Mr. Bronstein to the Company during the Bronstein Consultation Term,
(iii) receive up to $7,500 for expenses incurred by Mr. Bronstein in connection
with his relocation to Napa, California and for attorneys fees incurred in
connection with the negotiation of the Bronstein Termination Agreement and other
related agreements, and (iv) be deemed, for purposes of his participation in the
Company's 1998 Stock Option and Stock Award Plan, to have had his employment
with the Company terminated as of October 1, 2000.
On March 9, 2000, the Company received notice from Alan S.
Poole, a director of the Company, that Mr. Poole would not be standing for
re-election in 2000.
In December 1999, David C. Batten resigned from the Board
for personal reasons. Subsequent to Mr. Batten's resignation, the Board elected
to reduce the Board by one to five directors.
Effective September 10, 1999, the Company's Class A Common
Stock was transferred from the NASDAQ NMS to the NASDAQ SmallCap Market. On May
14, 1999, the NASD notified the Company that it intended to delist the Class A
Common Stock from NASDAQ NMS because the NASD believed that the Company had
failed to meet the NASDAQ NMS continued listing criteria. The NASD specifically
inquired about the Company's ability to meet the NASDAQ NMS net tangible asset
requirement and its minimum bid requirement. In response to a hearing before the
NASD in which the Company appealed the NASD's determination, the listing of the
Company's Class A Common Stock was transferred to the NASDAQ SmallCap Market,
effective September 10, 1999. The Company executed a one-for-five reverse stock
split (the "stock combination") on September 24, 1999 in order to comply with
the NASD's $1.00 minimum bid price requirements. The Company also executed a
one-for-five reverse stock split of its Class B Common Stock, which was delisted
from the NASDAQ SmallCap Market in the second quarter of 1998, which was
effective, for business purposes, on September 24, 1999.
<PAGE>
As of the close of business on October 29, 1999, a group
comprised of Jesse Upchurch, Drew Sycoff and Kevin Lockhart, individuals who had
agreed to act together as a group to vote their respective shares of Class A
Common Stock to elect persons designated by them to the Company's Board of
Directors and to work with management to maximize shareholder value (as
reflected in Amendment No.2 to Schedule 13D filed on April 15, 1999), disbanded
after the announcement by the Company of the election of Stephen A. Cloughley as
the new President and Chief Executive Officer of the Company and Robert Hurwitz
as the new Chairman of the Board of Directors of the Company.
On October 28, 1999, Stephen A. Cloughley was elected
President and Chief Executive Officer of the Company and Robert Hurwitz, a
director of the Company, was elected Chairman of the Company's Board of
Directors. Messrs. Cloughley and Hurwitz succeeded Thomas E. Gardner, who
previously held these positions.
The Company entered into an employment agreement with Mr.
Cloughley as of October 28, 1999, the term of which is through October 27, 2000
(the "Cloughley Employment Agreement"). As compensation for services rendered by
Mr. Cloughley under the Cloughley Employment Agreement, the Company shall pay
Mr. Cloughley an annual base salary of $180,000 and an award of ten-year
non-qualified stock options ("Performance-Based Stock Options") to purchase a
maximum of 55,000 shares of the Company's Class A Common Stock at $1.00 per
share. The Performance-Based Stock Options shall vest and become exercisable
upon the Company achieving certain financial goals that are set forth in the
Cloughley Employment Agreement. Under the terms of the Cloughley Employment
Agreement, all agreements between the Company and Mr. Cloughley entered into
prior to October 28, 1999 were voided. The Company had entered into a consultant
agreement with Mr. Cloughley on April 26, 1999, pursuant to which Mr. Cloughley
provided consulting services to the Company at the rate of $1,200 per day.
On October 28, 1999, the Company agreed to the terms of a
termination agreement by and between the Company and Thomas E. Gardner, who was
the Company's President, Chief Executive Officer and Chairman of the Board of
Directors at such time (the "Termination Agreement"), pursuant to which (i) Mr.
Gardner resigned as President and Chief Executive Officer of the Company and as
an officer of the Company as of October 28, 1999, (ii) Mr. Gardner resigned as
an employee and as a director of the Company as of November 12, 1999, (iii) the
employment agreement, dated as of October 17, 1997, between the Company and Mr.
Gardner (the "Gardner Employment Agreement") was terminated and (iv) the amended
and restated change in control agreement, dated as of October 17, 1997, between
the Company and Gardner (the "Gardner Change of Control Agreement") was
terminated. As compensation for entering into the Termination Agreement, Mr.
Gardner received, among other things: (i) $5,769.24, representing the amount
equal to Mr. Gardner's accrued and unpaid base salary through November 12, 1999;
(ii) a termination payment of $357,500; (iii) 50,000 shares of the Company's
Class A Common Stock; (iv) the right to exercise certain performance-based stock
options (to the extent that such option had vested and was exercisable on
October 31, 1999 or becomes vested and exercisable at any time prior to October
31, 2000) that were granted to Mr. Gardner pursuant to the Base Ten Systems,
Inc. Performance-Based Stock Option Agreement, dated as of October 17, 1997, by
and between the Company and Mr. Gardner (the "Gardner Performance-Based Stock
Option Agreement"), at any time prior to October 31, 2001; (v) the right to
exercise a certain Service-Based Stock Option (to the extent that such option
had vested and was exercisable as of October 31, 1999) that were granted to Mr.
Gardner pursuant to the Base Ten Systems, Inc. service-based stock option
agreement, dated as of October 17, 1997 (the "Service Option Agreement"), at any
time prior to October 31, 2001; and (vi) the right to exercise certain options
(to the extent that such options had vested and were exercisable as of October
31, 1999) granted to him by the Company pursuant to the Company's 1998 Stock
Option and Stock Award Plan (the "1998 Plan"), at any time prior to October 31,
2001.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information concerning beneficial
ownership of Class A Common Stock as of March 17, 2000 by (i) each of the
current directors and nominees for directors, (ii) each of the Named Executive
Officers listed in the Summary Compensation Table, (iii) all current directors
and executive officers of the Company as a group, and (iv) all persons known by
the Company to be the beneficial owners of 5% or more of Class A Common Stock.
<TABLE>
<CAPTION>
Shares
------------------------- ----------------------------------
Name Beneficially Percent
Owned (1) of Class (2)
------------------------- ----------------------------------
<S> <C> <C>
Stephen A. Cloughley (3) 380 *
Robert Hurwitz (3) 12,190 *
Alexander M. Adelson (3) 67,983 1.31%
Clark L. Bullock (3)(10) 800,000 15.60%
John C. Rhineberger (3) 10,200 *
Alan S. Poole (3) 18,000 *
David C. Batten (7) (3) 7,780 *
William Sword (3) 16,000 *
Carl W. Schafer (3) 16,000 *
William F. Hackett (3) 23,611 *
Robert Bronstein (3) 30,000 *
Thomas E. Gardner (3)(4)(8) 203,997 3.87%
C. Richard Bagshaw (5) 0 *
Harvey I. Cohen (3)(9) 380 *
Jesse L. Upchurch (6) 2,432,303 45.73%
Current Directors and 962,364 18.25%
Executive Officers as a group
(8 persons) (3)
- ---------------
</TABLE>
*Less than 1%.
<PAGE>
(1) Ownership of shares of Class A Common Stock included in the above table
includes shares issuable upon exercise of outstanding options and warrants
to purchase Class A Common Stock which are currently exercisable or
exercisable within 60 days of March 17, 2000. Includes Class A Common
Stock and does not include Class B Common Stock or Series B Preferred
Stock. None of the individuals included in the above table beneficially
own shares of Class B Common Stock or Series B Preferred Stock.
(2) Pursuant to the terms of the Series B Preferred Stock, no holder of Series
B Preferred Stock is entitled to receive shares of Class A Common Stock
upon conversion of the holder's Series B Preferred Stock to the extent
that the sum of (i) the number of shares of Class A Common Stock
beneficially owned by the holder and its affiliates (exclusive of shares
of Class A Common Stock issuable upon conversion of the unconverted
portion of the holder's Series B Preferred Stock and shares of Class A
Common Stock issuable upon conversion or exercise of any other securities
of the Company), and (ii) the number of shares of Class A Common Stock
issuable upon conversion of the Series B Preferred Stock then being
converted, would result in beneficial ownership by the holder and its
affiliates of more than 4.9% of the outstanding Class A Common Stock.
(3) With respect to Class A Common Stock issuable upon the exercise of
outstanding options or warrants which are currently exercisable or
exercisable within 60 days of March 17, 2000, includes as to (a) Mr.
Cloughley 380 shares, (b) Mr. Hurwitz 10,000 shares, (c) Mr. Adelson
51,500 shares, (d) Mr. Bullock 10,000 shares, (e) Mr. Rhineberger 10,000
shares, (f) Mr. Poole 18,000 shares, (h) Mr. Batten 4,000 shares, (i) Mr.
Sword 16,000 shares, (j) Mr. Schafer 16,000 shares, (k) Mr. Hackett 23,250
shares, (l) Mr. Bronstein 30,000 shares, (m) Mr. Gardner 151,000 shares,
(n) Mr. Cohen 380 shares and (o) all directors and executive officers as a
group 153,130 shares.
(4) Includes 400 shares of Class A Common Stock owned by Mr. Gardner's adult
children.
(5) The employment of Mr. Bagshaw terminated April 30, 1999. Upon the
termination of Mr. Bagshaw's employment, options to purchase 47,000 shares
of Class A Common Stock which were previously granted to Mr. Bagshaw
terminated.
(6) Based in part on filings by such individuals with the Securities and
Exchange Commission pursuant to Section 13(d) and/or Section 16 of the
Securities Exchange Act of 1934. Represents (i) 1,528,573 shares of Class
A Common Stock held directly by Mr. Upchurch, (ii) 703,730 shares of Class
A Common Stock held directly by the Constance J. Upchurch Family Trust, of
which Mr. Upchurch is the executor and beneficiary, and (iii) warrants to
purchase 200,000 shares of Class A Common Stock at $15.00 per share.
(7) Resigned from Board of Directors as of December 27, 1999.
(8) Resigned as an officer and an employee of the Company as of October 28,
1999 and as a director of the Company as of November 12, 1999.
(9) The employment of Mr. Cohen terminated October 8, 1999.
(10) Mr. Bullock sent notice to the Company of his intention to resign from the
Board of Directors on April 28, 2000, which the Company deems effective as
of such date.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is to be divided into three nearly
equal classes. The following persons have been nominated to serve as directors
for the terms indicated:
WILLIAM F. HACKETT, 49, joined the Company in December 1997 and serves as Chief
Financial Officer and Senior Vice President of Human Resources and Corporate
Strategy. From 1991 to 1997, Mr. Hackett served as Senior Manager for the
Princeton Data Division of Bloomberg Financial, responsible for the collection,
analysis, and distribution of information and product development. Mr. Hackett
is to be elected for a term of one year.
STEPHEN A. CLOUGHLEY, 39, was appointed a director of the Company in April 2000.
Mr. Cloughley joined the Company in February 1994 as head of sales for European
operations. In 1996, Mr. Cloughley relocated to the corporate offices in Trenton
where he served as Senior Vice President responsible for corporate strategy and
marketing. Mr. Cloughley left the Company in April 1999, but rejoined Base Ten
as President and Chief Executive Officer of the Company in October 1999. Mr.
Cloughley is to be elected for a term of three years.
If any of the nominees becomes unavailable for election,
which is not currently anticipated, proxies may be voted for a substitute
nominee selected by the Board.
Vote Required for the Election of Directors
Directors are elected by a plurality of the votes cast at
the Annual Meeting.
The Board recommends that the holders of Class A Common Stock,
Class B Common Stock and Series B Preferred Stock vote FOR the
election of Messrs. Hackett and Cloughley as Directors.
<PAGE>
CONTINUING DIRECTORS
JOHN C. RHINEBERGER, 56, is a director with a term expiring in 2002. Mr.
Rhineberger currently acts as a consultant through Rhineberger Organization,
Inc., providing sales, marketing and product development consulting in the home
center and other industries since August 1997. From 1996 to August 1997, Mr.
Rhineberger was a regional vice president of Shaw Industries, a carpet
manufacturer, responsible for retail operations. From 1993 to 1996, Mr.
Rhineberger was a merchandising executive for Home Depot. During the period from
1989 to 1993, Mr. Rhineberger served as President and Chief Executive Officer of
Post Tool Retail Stores and Sun Flooring Distribution, each a subsidiary of West
Union Company. From 1987 to 1988, Mr. Rhineberger was President and General
Manager of Sherwin William's Floor World, a floor covering retail business.
Prior to 1987, Mr. Rhineberger held various positions at Color Tile, a retail
store chain, including President and Chief Operating Officer.
ROBERT HURWITZ, 56, is a director with a term expiring in 2002. In November
1999, Mr. Hurwitz was appointed Chairman of the Board. From 1994 to 1999, Mr.
Hurwitz was Chairman of the Board and co-founder of HomePlace Stores, Inc., a
chain of home furnishings stores, wholly-owned by HomePlace Holdings, Inc., of
which Mr. Hurwitz was Chairman of the Board and Chief Executive Officer. In
January 1998, HomePlace Holdings, Inc. filed a voluntary petition in bankruptcy
under Chapter 11 of the United States Bankruptcy Act, from which it emerged
successfully in June 1999. Since December 1998, Mr. Hurwitz has been Chairman of
Earthmed.com, Inc., an internet portal company dealing with the alternative
medical community. From 1988 to 1994, Mr. Hurwitz was the Chairman and a
co-founder of OfficeMax, Inc., a chain of discount office supply stores. Prior
to 1988, Mr. Hurwitz served as Chairman of the Board and Chief Executive Officer
of Professional Housewares Distributors Inc., an international distributor of
housewares and electronic appliances, which he also co-founded in 1977. Mr.
Hurwitz has also been a general partner and a director of Coral Company, Inc., a
real estate development company, since 1987.
<PAGE>
PROPOSED INCREASE IN THE AUTHORIZED SHARES
OF CLASS A COMMON STOCK
(Proposal 1)
The Company's Restated Certificate of Incorporation
currently authorizes the issuance of a total of 12,000,000 shares of Class A
Common Stock and 400,000 shares of Class B Common Stock, each with a par value
of $5.00 per share, and 994,200.9375 shares of Preferred Stock, with a par value
of $1.00 per share. Of such currently authorized capital stock, as of May 11,
2000, 5,107,540 shares of Class A Common Stock were issued and outstanding,
12,631 shares of Class B Common Stock were issued and outstanding and
15,203.66584473 shares of Series B Preferred Stock were issued and outstanding.
As of May 11, 2000, an aggregate of 2,333,668 shares of Class A Common Stock
were reserved for issuance as set forth in the following table:
Number of
Shares of Class A Common Stock Reserved for Issuance Shares Reserved
- ---------------------------------------------------- ---------------
Class A Common Stock Warrants 767,709
Class A Common Stock Options 425,683
Conversion of Series B Preferred Stock 1,140,276
On March 5, 1999, the Company's then-outstanding Series A
Preferred Stock (the "Series A Preferred Stock") and warrants were exchanged for
Series B Convertible Preferred Stock, $1.00 par value ("Series B Preferred
Stock").
The Series B Preferred Stock matures on December 15, 2000.
On the maturity date, the Company must redeem the outstanding preferred stock at
its Mandatory Redemption Price, which is the sum of the purchase price of $1,000
per share, accrued but unpaid dividends and other contingent payments as
provided pursuant to the terms of the Series B Preferred Stock. The portion of
the Mandatory Redemption Price constituting such other contingent payments is
payable in cash whereas the purchase price and accrued but unpaid dividends are
payable in cash or common stock at the option of the Company. If the Company
elects to settle the redemption in Class A Common Stock, the Mandatory
Redemption Price is 1.25 times the purchase price.
Holders of the Series B Preferred Stock have the right to
convert their shares of Series B Preferred Stock at any time, or from time to
time, into a number of shares of Class A Common Stock equal to the Mandatory
Redemption Price of each share of such Series B Preferred Stock divided by
$20.00. Since the Company currently has 4,558,832 authorized but unissued or
unreserved shares of Class A Common Stock remaining, including shares reserved
for issuance upon conversions by holders of Series B Preferred Stock, in the
event that the price of the Company's Class A Common Stock is below $3.33 per
share on December 15, 2000, the Company would not have enough authorized shares
of Class A Common Stock available for issuance upon maturity of the Series B
Preferred Stock unless the shareholders approve this proposal to increase the
number of authorized shares from 12,000,000 to 27,000,000.
At this Annual Meeting, shareholders are also being asked
to approve the amendment to the Company's 1998 Stock Option and Stock Award Plan
under which an additional 500,000 shares of Class A Common Stock would be
reserved for issuance and the 1998 Directors Stock option plan under which an
additional 200,000 shares of Class A Common Stock would be reserved for
issuance, for a total of an additional 700,000 shares of Class A Common Stock
which would be reserved under the equity-based plans, assuming such amendments
are approved by shareholders.
After giving effect to all shares of Class A Common Stock
reserved and to be reserved for issuance, the Company does not believe it has
sufficient uncommitted shares of Class A Common Stock for use in future
transactions involving the issuance of shares of the Company's Class A Common
Stock.
The Board of Directors therefore has adopted a proposed
amendment to the Company's Restated Certificate of Incorporation to increase the
number of authorized shares of Class A Common Stock from 12,000,000 to
27,000,000.
The additional shares, if so authorized, could be issued at
the discretion of the Board without any further action by shareholders (except
as required by applicable law or regulation and except as reserved for issuance
to the holders of Series B Preferred Stock and for outstanding options) in
connection with acquisitions, efforts to raise additional capital, issuances of
additional options and stock awards or warrants, for conversions of Series B
Preferred Stock and for other corporate purposes. Shares of Class A Common Stock
will be issued only upon a determination by the Board that a proposed issuance
is in the best interest of the Company and its shareholders.
The Company currently has no plans or commitments that
would involve the issuance of additional shares of Class A Common Stock, other
than as referred to above. However, in connection with future capital needs, the
Board may from time to time consider issuing shares of Class A Common Stock in
one or more capital financings or using shares of Class A Common Stock as a
component thereof, including derivative securities such as convertible
instruments or stock purchase warrants.
The Company also believes that acquisition opportunities
may be available to it. The increase in authorized shares would allow the Board
to consider and, if in the best interest of the Company and its shareholders,
take advantage of such acquisition opportunities. In addition, the flexibility
vested in the Board to authorize the issuance and sale of authorized but
unissued shares of Class A Common Stock and/or to issue preferred Stock in one
or more series could enhance the Board's bargaining capability on behalf of the
Company's shareholders in a takeover situation and could, under some
circumstances, be used to render more difficult or discourage a merger, tender
offer or proxy contest, the assumption of control by a holder of a large block
of the Company's securities, or the removal of an incumbent management, even if
such a transaction were favored by the holders of the requisite number of the
then outstanding shares. Accordingly, shareholders of the Company might be
deprived of an opportunity to consider a takeover proposal which a third party
might consider if the Company did not have a sufficient number of uncommitted
authorized and unissued shares of Class A Common Stock.
<PAGE>
This proposal is not the result of management's knowledge
of any specific effort to accumulate the Company's securities or to obtain
control of the Company by means of a merger, tender offer, proxy solicitation in
opposition to management or otherwise. The Company is not submitting this
proposal to enable it to frustrate any efforts by another party to acquire a
controlling interest or to seek Board representation.
The submission of this proposal is not a part of any plan
by the Company's management to adopt a series of amendments to the Restated
Certificate of Incorporation or by-laws so as to render a takeover of the
Company more difficult. Except as indicated above, management is not aware of
the existence of any other provisions in the Restated Certificate of
Incorporation or by-laws having an anti-takeover effect.
Vote Required to Approve the Proposed Increase In Authorized Shares
Assuming the presence of a quorum, the affirmative vote by
holders of two-thirds of the votes cast by holders entitled to vote at the
Annual Meeting is required to approve the amendment to the Company's Restated
Certificate of Incorporation, with all shareholders voting together as a single
class.
The Board of Directors recommends a vote FOR the proposed
increase in the authorized Class A Common Stock.
<PAGE>
APPROVAL OF THE AMENDMENT TO THE
1998 STOCK OPTION AND STOCK AWARD PLAN
(Proposal 2)
The Board of Directors, subject to shareholder approval,
has approved an amendment to the Company's 1998 Stock Option and Stock Award
Plan (the "1998 Stock Plan") to increase the number of shares of Class A Common
Stock subject to the 1998 Stock Plan to 1,100,000, of which no more than 900,000
may be awarded as incentive stock options under the 1998 Stock Plan. This
amendment would increase from 642,409 to 1,193,484 the number of shares subject
to the 1998 Stock Plan and would increase from 400,000 to 900,000 the number of
shares that may be awarded as incentive stock options under the 1998 Stock Plan.
The number of shares subject to the 1998 Stock Plan
includes additional shares pursuant to the Additional Annual Increment (as
defined below) for May 1, 1999 and May 1, 2000.
The Board of Directors considers the number of shares
currently authorized under the 1998 Stock Plan and the maximum number of shares
that may be awarded as incentive stock options to be insufficient to carry out
the purposes of the 1998 Stock Plan. The Board of Directors originally adopted
the 1998 Stock Plan in January 1998. The 1998 Stock Plan was approved by the
shareholders of the Company in April 1998 and amended in November 1998. A
general discussion of the principal terms of the 1998 Stock Plan and the
proposed amendment are set forth below. This discussion is qualified in its
entirety by the full text of the 1998 Stock Plan. The full text of the 1998
Stock Plan, as amended, including the proposed amendment, is attached to this
Proxy Statement as Exhibit A.
Summary of Material Features
Purposes of the 1998 Stock Plan and Eligibility. The 1998
Stock Plan is designed to promote the growth and profitability of the Company
and its subsidiaries by giving key employees the opportunity to acquire a
proprietary interest in the Company through ownership of the Company's Class A
Common Stock. The 1998 Stock Plan authorizes the Board of Directors or a
Committee of the Board consisting of at least two members of the Board
qualifying as "non-employee directors" under SEC Rule 16b-3 (collectively the
"Committee") to grant incentive stock options, non-qualified stock options,
stock appreciation rights, awards of restricted stock, and bonuses payable in
Class A Common Stock, to those employees deemed by the Committee, in its
discretion, to have the ability to make substantial contributions to the growth
and profitability of the Company or its subsidiaries. Key employees, including
officers of the Company, are eligible to receive grants and awards under the
1998 Stock Plan. Non-employee directors and Committee members are not eligible
to participate in the 1998 Stock Plan. At present, approximately 75 persons may
be eligible for participation in the 1998 Stock Plan
Administration. The Committee is authorized to determine
the term during which an option may be exercised, which may not exceed ten
years. No option is exercisable prior to six months from the date it was
granted, except in the case of death or certain tender offers, mergers,
liquidation, dissolution, or changes in control, as described in the 1998 Stock
Plan. The Committee is also authorized in its discretion to specify the number
of shares to be covered by each award, as well as the option price, which may
not be less than 100% of the fair market value of a share of Class A Common
Stock at the time the option is granted. The Committee has full power and
authority to administer and interpret the 1998 Stock Plan, and the Committee's
interpretations, as well as its grants and awards, are final and conclusive.
Shares Subject to the Plan. The total number of shares that
may be optioned or awarded under the 1998 Stock Plan is currently 600,000 shares
of Class A Common Stock, plus an additional amount of shares of Class A Common
Stock on May 1 of each year, from May 1, 1999 to May 1, 2007 inclusive, equal to
one percent of the number of shares of Class A Common Stock outstanding on April
30 of such year ("Additional Annual Increment").
The May 1, 1999 Additional Annual Increment increased by
42,409 the number of shares of Class A Common Stock that may be awarded under
the 1998 Stock Plan. The May 1, 2000 Additional Annual Increment increased by
51,075 the number of shares of Class A Common Stock that may be awarded under
the 1998 Stock Plan. If the proposed amendment is approved by the shareholders,
the total number of shares of Class A Common Stock issuable under the 1998 Stock
Plan will be increased to 1,193,484, subject to subsequent Additional Annual
Increments. Of that amount, (i) no more than 30,000 shares, plus shares equal to
twenty percent (20%) of each Additional Annual Increment, may be awarded as
restricted stock and (ii) no more than 900,000 shares may be awarded as
incentive stock options under Section 422 of the Internal Revenue Code ("Code"),
all subject to adjustment as provided in the 1998 Stock Plan.
As of May 11, 2000, options and awards were outstanding
under the 1998 Stock Plan to purchase an aggregate of 507,270 shares of Class A
Common Stock.
Payment of Exercise Price. The purchase price upon exercise
of an option may be paid either in cash or in shares of Class A Common Stock
already owned by the optionee or a combination of cash and shares. No optionee
shall have any right to dividends or other rights of a shareholder with respect
to shares subject to an option until the optionee has given written notice of
exercise and has paid for such shares and applicable taxes thereon. The
Committee may permit tax-withholding obligations to be met by the withholding of
Class A Common Stock otherwise deliverable to the recipient pursuant to
procedures approved by the Committee.
Death, Disability and Retirement. If an optionee's
employment is terminated by reason of death, retirement under a retirement plan
of the Company or a subsidiary, or permanent disability, as determined by the
Committee, such optionee's option is exercisable until the expiration of the
stated period of the option. In all other cases, unless the Committee determines
otherwise, options held by optionees terminate when the optionee's employment
with the Company or a subsidiary terminates. No option is transferable except by
will or by operation of the laws of descent and distribution, and an option may
be exercised during an optionee's lifetime only by the optionee.
Appreciation Right. The Committee, at its discretion, may
grant stock appreciation rights, which are rights to exercise options without
payment of the purchase price. Upon the exercise of such right, an optionee
shall receive the number of whole shares of Class A Common Stock, or, in the
Committee's discretion, the amount of cash determined by dividing the fair
market value per share of Class A Common Stock on the date of exercise into the
excess of the aggregate fair market value over the aggregate exercise price for
the number of option shares covered by the exercise. The option is reduced by
the number of shares with respect to which such rights are exercised, which
shares may not thereafter again be optioned.
Limited Rights. The 1998 Stock Plan provides that the
Committee may, in its discretion, grant options containing provisions for
limited rights which are exercisable upon the occurrence of certain events and
expiring 30 days thereafter, including, without limitation, upon (i) the
consummation of a tender offer for at least 20% of the outstanding Class A
Common Stock, (ii) a proxy contest resulting in the replacement of a majority of
the Company's Board of Directors, (iii) a merger or reorganization of the
Company in which the Company does not survive or in which the shareholders of
the Company receive stock or securities of another corporation or cash, a
liquidation or dissolution of the Company, or (iv) other similar events. Limited
rights permit optionees to receive in cash either (i) the value of each share
covered by an option at the highest market price per share at which Class A
Common Stock traded on NASDAQ for the 60 days immediately preceding the exercise
event (or, if such exercise event is a tender offer or exchange offer, the value
per share set by the tender or offeror), less the option price per share
specified in the option; or (ii) if provided by the Committee in its discretion
at the time of grant, the value of each share covered by the option at the
highest market price per share at which the Class A Common Stock traded on
NASDAQ on the date of exercise, less the option price per share specified in the
option. Limited rights may not extend the exercise period of any option and, to
the extent any such rights are exercised, will reduce the shares of Class A
Common Stock available under the 1998 Stock Plan and the shares of such stock
covered by the options to which the limited rights relate.
Restricted Stock. The 1998 Stock Plan provides that awards
of restricted stock may be granted in addition to, or in lieu of, option grants.
During a period set by the Committee at the time of each award of restricted
stock, a restricted stock award recipient is prohibited from selling,
transferring, pledging or assigning the shares of restricted stock unless the
recipient dies or his employment terminates by reason of permanent disability,
as established by the Committee, or, if determined by the Committee, by
retirement under a retirement plan of the Company or a subsidiary, in which
case, shares of restricted stock become free of all restrictions. Shares of
restricted stock may be voted and, subject to certain limitations, holders of
restricted stock may receive all dividends paid thereon. Unless the Committee
determines otherwise, shares of restricted stock are forfeited and revert to the
Company upon the recipient's termination of employment during the restriction
period for any reason other than the recipient's death, permanent disability, as
determined by the Committee, or, if established by the Committee, retirement
under a retirement plan of the Company or a subsidiary.
Adjustment. Subject to certain limitations, the 1998 Stock
Plan provides for an adjustment in the number of shares of Class A Common Stock
subject to outstanding options or awards, or the class or exercise prices
thereof, in the event of a stock dividend, stock split, reverse split,
subdivision, recapitalization, merger, consolidation, combination or exchange of
shares, separation, reorganization or liquidation.
Change in Control. In the event of a "change in control" as
set forth in Section 12 of the 1998 Stock Plan, the 1998 Stock Plan provides
that (i) all restrictions on restricted stock previously awarded under the 1998
Stock Plan shall lapse and (ii) all stock options and stock appreciation rights
which are outstanding shall become immediately exercisable in full. In addition,
the Committee may determine that, upon a "change of control," outstanding
options shall be adjusted and shall make such adjustments by substituting stock
or other securities of any successor to the Company in the place of shares of
Class A Common Stock subject to options.
Bonuses Payable in Stock. In lieu of paying a cash bonus to
employees eligible to participate in the 1998 Stock Plan, the Committee, in its
sole discretion, may pay bonuses in shares of unrestricted Class A Common Stock,
or partly in shares of unrestricted Class A Common Stock and partly in cash. The
number of shares of Class A Common Stock payable in lieu of cash shall be
determined by dividing such bonus amount by the fair market value, as determined
under the 1998 Stock Plan, of one share of Class A Common Stock on the date the
bonus is payable. The Company will withhold from such bonus an amount of cash
sufficient to meet tax-withholding obligations.
Amendments. The Board of Directors may amend, alter or
discontinue the 1998 Stock Plan, but no amendment may, without shareholder
approval, increase the maximum number of shares for which options and awards may
be granted, decrease the option price of an option to less than 100% of the fair
market value of a share of Class A Common Stock on the date of the grant of the
option, change the class of persons eligible to receive options and other awards
under the 1998 Stock Plan, or extend the duration of the 1998 Stock Plan. No
award or option may be granted under the 1998 Stock Plan after January 12, 2008,
but awards or options granted prior to such date may extend beyond that date.
Federal Income Tax Consequences
Under the Internal Revenue Code (the "Code"), the grant of
options does not result in taxable income to the optionees or any tax deduction
to the Company. The transfer of Class A Common Stock to optionees upon exercise
of their options may or may not give rise to immediate or deferred taxable
income to the optionees and tax deductions to the Company, depending upon
whether or not the options are incentive stock options. In general, the exercise
of an incentive stock option is exempt from regular income tax (but not
alternative minimum tax) and does not result in a tax deduction to the Company
unless the optionee disposes of the Class A Common Stock within two years of the
grant of the option or within one year of the transfer of such Class A Common
Stock to the individual. However, the exercise of an option which is not an
incentive stock option generally results in immediate taxable income to the
optionee equal to the difference between the exercise price and the fair market
value of the underlying shares, and a corresponding tax deduction to the Company
equal to the amount of ordinary income recognized by the individual for the
taxable year in which the individual recognizes such income.
The transfer of restricted stock to an employee is
generally taxable to the employee and deductible by the Company when the
restrictions lapse, unless the employee elects to be taxed at the time of the
transfer without regard to the restrictions. The payment of bonuses in Class A
Common Stock is immediately taxable to the individual and deductible by the
Company. The exercise of a stock appreciation right for Class A Common Stock is
generally taxable and deductible in the same manner as the exercise of an option
that is not an incentive stock option.
Section 162(m) of the Code limits the income tax deduction
for publicly held companies to $1,000,000 in any tax year for compensation paid
to each of the chief executive officer and the other named executive officers.
This limitation applies to all deductible compensation including the deduction
arising from the payment of incentive compensation. Various forms of
compensation are exempt from this deduction limitation, including payments that
are (i) subject to the attainment of pre-established objective performance
goals, (ii) established and administered by outside directors, and (iii)
approved by shareholders. Particular rules apply in implementing Section 162(m)
to equity-based plans. The Company believes that compensation derived from the
exercise of stock options issued under the 1998 Stock Plan, if approved by
shareholders, will qualify for exemption from the operation of Section 162(m)
and therefore will be deductible by the Company.
Reasons for the Proposed Amendment
The Board of Directors believes that the 1998 Stock Plan
increases the proprietary and vested interest of the Company's key employees in
the growth and performance of the Company and helps enable the Company to
attract and retain highly qualified employees. The Board of Directors believes
that the proposed amendment to the 1998 Stock Plan will achieve the foregoing
goals by increasing the number of shares subject to the 1998 Stock Plan to
accommodate grants of options to future key employees.
Vote Required to Approve the Proposed Amendment to the 1998 Stock Plan
The proposed amendment to the 1998 Stock Plan will be
approved if a greater number of votes are cast in favor of it than are cast
against it.
The Board of Directors recommends that the holders of Class A Common Stock,
Class B Common Stock and Series B Preferred Stock vote FOR
the proposed amendment to the 1998 Stock Option and Stock Award Plan.
<PAGE>
APPROVAL OF THE AMENDMENT TO THE
1998 DIRECTORS' STOCK OPTION PLAN
(Proposal 3)
The Board of Directors, subject to shareholder approval,
has approved an amendment to the Company's 1998 Directors' Stock Option Plan
(the "Directors' Plan") to increase the number of shares of Class A Common Stock
subject to the Directors' Plan by an aggregate of 200,000 shares, from 140,000
shares to 340,000 shares. The Board of Directors considers the original amount
of shares authorized under the Directors' Plan insufficient to carry out the
purposes of the Directors' Plan.
The Directors' Plan was originally adopted by the Board of
Directors in January 1998 and approved by the shareholders of the Company in
April 1998. A general discussion of the principal terms of the Directors' Plan
and the proposed amendment are set forth below. This discussion is qualified in
its entirety by the full text of the Directors' Plan. The full text of the
Directors' Plan, as amended, is attached to this Proxy Statement as Exhibit B.
Summary of Material Features
The Directors' Plan is intended to encourage directors who
are not employees of the Company to acquire a proprietary interest in the future
of the Company through the ownership of Class A Common Stock. The Directors'
Plan is also intended to encourage qualified persons to serve as directors of
the Company.
The Directors' Plan is generally administered and
interpreted by the Compensation Committee (the "Compensation Committee"),
although the Board of Directors determines when and to whom options will be
granted and the number of shares to be included in each grant. Directors who are
not employees of the Company are eligible to be granted options under the
Directors' Plan. There are currently five directors eligible for participation
under the Directors' Plan. Each of these directors has an interest in the
approval of the proposed amendment and may benefit as the recipient of options
that may be granted under the Directors' Plan if the proposed amendment is
approved by the shareholders.
The total number of shares that may be issued pursuant to
options granted under the Directors' Plan is currently 140,000 shares of Class A
Common Stock, subject to adjustment in accordance with the terms of the
Directors' Plan. Options are now outstanding under the Directors' Plan to
purchase an aggregate of 76,000 shares of Class A Common Stock.
The Directors' Plan will continue until the earlier of
termination by the Board of Directors (in which case, outstanding options shall
remain outstanding for the term of their grant) or the date when all shares
covered by the Directors' Plan are purchased.
The option price per share shall be as determined by the
Compensation Committee, although it may not be less than 100% of the fair market
value (as defined in the Directors' Plan) of a share of Class A Common Stock on
the date the option is granted. The term shall be as determined by the Board of
Directors, but may not exceed 10 years. Options are immediately exercisable,
through the payment of cash and/or shares of Class A Common Stock.
Options are not transferable by the optionee other than by
will or the laws of descent and distribution, provided that the Compensation
Committee may, in its discretion, permit transfer to the optionee's immediate
family or a trust or similar vehicle established solely for the benefit of such
family members.
Subject to certain limitations, the Directors' Plan
provides for an adjustment in the number of shares of Class A Common Stock
subject to outstanding options, or the number or option prices thereof, in the
event of a stock dividend, stock split, reverse split, subdivision,
recapitalization, merger, consolidation, combination or exchange of shares,
separation, reorganization or liquidation.
The Board of Directors may amend, alter or discontinue the
Directors' Plan, but no amendment may, without shareholder approval, increase
the number of shares for which options may be granted or decrease the option
price of an option to less than 100% of the fair market value of a share of
Class A Common Stock on the date of the grant of the option.
Federal Income Tax Consequences
Under the Code, the grant of options does not result in
taxable income to the optionees or any tax deduction to the Company. The
exercise of an option generally results in ordinary taxable income to the
optionee equal to the difference between the exercise price and the fair market
value of the underlying shares, and a corresponding tax deduction to the Company
equal to the amount of ordinary income recognized by the individual for the
taxable year in which the individual recognizes such income.
Reasons for the Proposed Amendment
The Board of Directors believes that the Directors' Plan
increases the proprietary and vested interest of the Company's non-employee
directors in the growth and performance of the Company and helps enable the
Company to attract and retain highly qualified persons to serve as directors.
The Board of Directors believes that the proposed amendment to the Directors'
Plan will achieve the foregoing goals by increasing the number of shares subject
to the Directors' Plan to accommodate grants of options to future directors.
Vote Required to Approve the Proposed Amendment to the Directors' Plan
The proposed amendment to the Directors' Plan will be
approved if a greater number of votes are cast in favor of it than are cast
against it.
The Board of Directors recommends that the holders of Class A Common Stock,
Class B Common Stock and Series B Preferred Stock vote FOR
the proposed amendment to the 1998 Directors' Stock Option Plan.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The Summary Compensation Table
set forth below shows certain compensation information for all individuals
serving as the Company's Chief Executive Officer or acting in a similar capacity
during the 1999 fiscal year, the four most highly compensated executive
officers, other than the Chief Executive Officer, serving as executive officers
at the end of the 1999 fiscal year, and two highly compensated individuals not
serving as executive officers at the end of the 1999 fiscal year (collectively,
the "Named Executive Officers") for services rendered in all capacities during
the fiscal years ended December 31, 1999, December 31, 1998, the Interim Period
and October 31, 1997. This information includes base salaries, bonus awards and
long-term incentive plan payouts, the number of stock options and stock
appreciation rights ("SARs") granted, and certain other compensation, if any,
whether paid or deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
Awards
Securities
Underlying A11 Other
Options/ Compens-
Name and Principal Position Period(6) Salary Bonus (1) SARs (2) ation (3)
- ----------------------------------------------------------- ------------------ ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Stephen A. Cloughley 1999 Fiscal Year $74,923 55,000 $71,524
President, Chief Executive Officer, 10/99 to present 1998 Fiscal Year $137,308 $25,000 150,000
Senior Vice President, 2/98 to 4/99 Interim Period $18,462
Vice President, Marketing, 8/97 to 2/98 1997 Fiscal Year $112,115 4,900 $1,001
Director of Marketing, 6/96 to 8/97
Thomas E. Gardner (5) 1999 Fiscal Year $271,154 $401,250
President, Chief Executive Officer, 11/97 to 10/99 1998 Fiscal Year $300,000 $42,500 1,250,000
Co-Chairman, 11/97 to 4/98 Interim Period $40,385
Chairman, 4/98 to 10/99 1997 Fiscal Year
William F. Hackett 1999 Fiscal Year $174,808
Senior Vice President, Chief Financial Officer, 1998 Fiscal Year $166,923 $25,000 195,000
and Secretary, 12/97 to present Interim Period $4,923
1997 Fiscal Year
Robert J. Bronstein (4) 1999 Fiscal Year $107,692 $40,000 60,000 $41,706
President, Clinical Software Solutions, 6/99 to present 1998 Fiscal Year
Interim Period
1997 Fiscal Year
C. Richard Bagshaw (5) 1999 Fiscal Year $69,231 $111,807
Executive Vice President, 12/97 to 4/99 1998 Fiscal Year $180,000 $30,000 235,000
Interim Period $10,385
1997 Fiscal Year
Harvey I. Cohen (5) 1999 Fiscal Year $141,346 $18,462
Senior Vice President, 2/98 to 10/99 1998 Fiscal Year $154,692 $25,000 110,000
Sr. V.P. Software Development, 10/97 to 2/98 Interim Period $22,308
V.P. Software Development, 11/94 to 10/96 1997 Fiscal Year $167,816 4,900 $11,204
</TABLE>
(1) Bonuses earned in the 1998 fiscal year were paid by the Company in
January 1999.
(2) Securities represent shares of Class A Common Stock underlying
options.
(3) Fiscal 1998 include interest paid on balance of individuals' deferred
compensation, vacation entitlement payout, commissions, separation
pay, stock grant in lieu of option award, and forgiveness of employee
loan. For fiscal 1997, the amounts indicated represent forgiveness of
employee loans.
(4) Accrued vacation acquired by Base Ten during purchase of Almedica
which was paid out as part of Base Ten's acquisition of Almedica. Mr.
Bronstein resigned as an officer and employee of the Company April 1,
2000.
(5) The employment of Messrs. Bagshaw, Cohen and Gardner terminated April
30, 1999, October 8, 1999 and October 28, 1999, respectively.
(6) In January 1998, the Company elected to change its fiscal year to an
accounting period from January 1 to December 31. The interim period
commences November 1, 1997 and ends December 31, 1997.
Option/SAR Grants in Last Fiscal Year. The following table
shows information regarding grants of stock options made to the Named Executive
Officers during the fiscal year ended December 31, 1999 and the Interim Period,
a two month period ending December 31, 1998. The amounts shown as potential
realizable values are based on assumed annualized rates of stock price
appreciation of five percent and ten percent over the term of the options. These
potential realizable values are based solely on arbitrarily assumed rates of
appreciation required by applicable SEC regulations. Actual gains, if any, on
option exercises and common stock holdings are dependent on the future
performance of the Company's Class A Common Stock and overall stock market
conditions.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR AND INTERIM PERIOD
Potential
Realizable
Value at Assumed
Annual Rates of
Number of Stock Price
Securities % of Total Appreciation for
Underlying Options/SARs Option Term
Options/SARs Granted to Exercise or Base Expiration
Name Granted (1) Employees Price ($/Sh) Date 5% 10%
---- ----------- --------- ------------ ----------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Cloughley 55,000 35.40% $1.00 10/27/09 34,589 87,656
Thomas E. Gardner 0 0 0 -- -- --
William F. Hackett 0 0 0 -- -- --
Robert J. Bronstein (2) 60,000 38.62% $4.53 6/21/09 170,934 433,179
C. Richard Bagshaw 0 0 0 -- -- --
Harvey I. Cohen 0 0 0 -- -- --
- ---------------------------
</TABLE>
(1) Securities represent shares of Class A Common Stock underlying options.
(2) Certain options held by Mr. Bronstein will terminate in connection with
his separation from the Company. See "Employment Contracts, Termination of
Employment and Change in Control Arrangements."
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values. The following table summarizes for each of
the Named Executive Officers the number of stock options, if any, exercised
during the fiscal year ended December 31, 1999, the aggregate dollar value
realized upon exercise, the total number of securities underlying unexercised
options, if any, held at December 31, 1999, and the aggregate dollar value of
in-the-money, unexercised options, if any, held at December 31, 1999. Value
realized upon exercise is the difference between the fair market value of the
underlying stock on the exercise date and the exercise or base price of the
option. Value of unexercised, in-the-money options at fiscal year-end is the
difference between the exercise or base price and the fair market value of the
underlying stock on December 31, 1999. The last sale price of the Class A Common
Stock on December 31, 1999 was 2 3/8. The values in the column "Value of
Unexercised In-The-Money Options/SARs at FY-End and Interim Period End" have not
been, and may never be, realized. The underlying options have not been, and may
not be, exercised, and actual gains, if any, on exercise will depend upon the
value of the underlying stock on the date of exercise.
No options were exercised by the Named Executive Officers
during the 1999 fiscal year. The following table sets forth information
regarding the value of unexercised options held by the named Executive Officers
of the Company.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND INTERIM PERIOD
AND FISCAL YEAR-END AND INTERIM PERIOD END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In the Money
Options/SARs at Options/SARs at
FY-End and Interim Period End (1) FY-End and Interim Period End (1)
--------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Stephen A. Cloughley 380 55,000 (2) 0 75,625
Thomas E. Gardner 151,000 40,000 0 0
William F. Hackett 23,250 15,750 0 0
Robert Bronstein 30,000 30,000 0 0
C. Richard Bagshaw 0 0 0 0
Harvey I. Cohen 380 0 0 0
</TABLE>
(1) Securities represent shares of Class A Common Stock underlying options.
(2) Subject to the terms and conditions set forth in Exhibit A
(Performance-Based Stock Option Agreement) of Employment Agreement dated
October 28, 1999.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
Directors were not paid a fee for service as a director or
committee member during fiscal 1999. However, during fiscal 1999, Messrs.
Rhineberger and Hurwitz each received options for an aggregate of 20,000 shares
of Class A Common Stock. The options are exercisable at the market price of such
stock as of the dates of grant. As of December 1999, Mr. Hurwitz will receive
annual compensation in the amount of $50,000 for his service as Chairman.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors met 20 times at regularly scheduled
meetings during the fiscal year 1999. Standing committees of the Board currently
include a Compensation Committee and an Audit Committee. Each incumbent director
has attended at least 92% of all Board meetings and applicable committee
meetings, except for Messrs. Batten and Schafer, each of whom is no longer a
member of the Board.
During fiscal year 1999, the Compensation Committee, which
met four times during 1999, was comprised of Messrs. Rhineberger and Adelson.
The Board of Directors adopted a written charter of the Compensation Committee
in which the function of the Committee is to review and set the compensation of
the Company's Chief Executive Officer, review and take action on the
recommendations of the Chief Executive Officer as to the compensation of the
Company's other officers and key personnel, approve the grants of any bonuses to
officers, review other incentive plans, stock options and other forms of
compensation, administer the Company's stock plans and approve stock option
awards.
Messrs. Rhineberger and Poole are presently the members of
the Audit Committee. The Audit Committee, which is chaired by Mr. Poole, met
three times during fiscal year 1999. The Audit Committee meets at least annually
with the Company's principal financial and accounting officers and independent
public accountants to review the scope of auditing procedures, the Company's
policies relating to internal auditing and accounting procedures and controls,
and to discuss results of the annual audit of the Company's financial
statements. The Board of Directors adopted a written charter of the Audit
Committee in which the function of the Committee is to review the financial
reporting process, system of internal control, audit process, and the Company's
process for monitoring compliance with laws and regulations.
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
On March 31, 2000, the Company entered into an agreement
with Robert J. Bronstein, the President of the Company's Clinical Software
Solutions Division, by which Mr. Bronstein resigned as an officer and an
employee of the Company, effective April 1, 2000. See "Recent Developments" for
a more detailed description of the terms of this agreement.
The Company entered into an employment agreement with
Stephen A. Cloughley as of October 28, 1999, the term of which is through
October 27, 2000. See "Recent Developments" for a more detailed description of
the terms of this agreement.
On October 28, 1999, the Company agreed to the terms of a
termination agreement by and between the Company and Thomas E. Gardner, who was
the Company's President, Chief Executive Officer and Chairman of the Board of
Directors at such time, pursuant to which (i) Mr. Gardner resigned as President
and Chief Executive Officer of the Company and as an officer of the Company as
of October 28, 1999, (ii) Mr. Gardner resigned as an employee and as a director
of the Company as of November 12, 1999, (iii) the employment agreement, dated as
of October 17, 1997, between the Company and Mr. Gardner was terminated and (iv)
the amended and restated change in control agreement, dated as of October 17,
1997, between the Company and Gardner was terminated. See "Recent Developments"
for a more detailed description of the terms of this agreement.
The Company entered into a consultant agreement with Mr.
Cloughley on April 26, 1999, pursuant to which Mr. Cloughley provided consulting
services to the Company at the rate of $1,200 per day. This agreement terminated
on October 28, 1999, in accordance with, and upon the agreement to, the terms of
the Mr. Cloughley's Employment Agreement.
Mr. Cloughley initially joined the Company in February
1994. In 1996, Mr. Cloughley transferred to the corporate offices in Trenton,
New Jersey, where his managerial assignments encompassed marketing and corporate
development. In April 1999, Mr. Cloughley resigned from the Company and received
severance pay, accrued vacation and unpaid salary of $60,000, half of which was
used to repay a loan of $30,000 owed to the Company. Mr. Cloughley agreed not to
accept employment either directly or as a consultant with a direct competitor of
the Company for a period of no less than two years following his termination.
Mr. Cloughley rejoined the Company on October 28, 1999.
In April 1999, C. Richard Bagshaw's employment terminated.
Mr. Bagshaw received current salary continuation for a period of twelve months
from the date of termination in accordance with the terms of his Employment
Agreement, dated November 26, 1997.
<PAGE>
The Company has a change in control agreement in effect
with Mr. Hackett. The agreement provides that if, within three years after
certain "changes of control" (as defined in the agreement, including an
acquisition of 40% or more of the combined voting power of the outstanding stock
of the Company, a substantial change in the composition of the Board not
approved by "continuing directors," or certain mergers or sales involving the
Company), the executive's employment with the Company is terminated by the
Company other than for "cause," death or disability, or by the executive for
"good reason" (all as defined in the agreement), the executive would be entitled
to receive, subject to certain limitations, a lump sum cash payment and health
insurance benefits for three years following termination of employment, having
an aggregate value equal to 2.99 times the total of average annual compensation
and cost of employee benefits for the executive for the five years prior to the
change of control, subject to a maximum amount equal of the Company's permitted
deduction under Section 280G of the Internal Revenue Code. The agreement is
subject to being extended automatically from year to year unless the Company
gives at least fifteen months' prior notice of its election not to extend the
term.
On November 13, 1998, Jesse L. Upchurch became the owner of
securities representing over 40% of the combined voting power of the Company's
outstanding securities. For purposes of the change in control agreement in
effect with Mr. Hackett, a change in control is deemed to have occurred at that
time. No payments were made to Mr. Hackett since that time pursuant to the
agreements because the events that would trigger any such payments have not
occurred. For purposes of the Company's employee benefit plans, a change of
control has not been deemed to have occurred.
<PAGE>
REPORT OF COMMITTEES ON EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to
retain and fairly compensate its company executives and to motivate them to
maximize Base Ten's financial performance. The compensation program consists of
three key elements: a base salary, an annual incentive bonus, and periodic
grants of stock options.
Base Ten's compensation policies for its executive
officers, including its chief executive officer, are administered by the
Compensation Committee or, as to the grant of stock options, by the Board or in
certain instances by a specifically designated committee of the Board.
Base Salary. Base salaries of the executive officers,
including the Chief Executive Officer (the "CEO"), were established at the
beginning of the fiscal year based on the Compensation Committee's assessment of
(i) the overall performance of the CEO and the recommendations of the CEO on
officers other than himself, (ii) the nature of the position and
responsibilities of the CEO and each of the other individuals, (iii) the
contribution, experience and relative importance of the executive officers to
the Company, (iv) executive salaries at comparable public and private
manufacturing companies and (v) the Company's financial condition as well as the
Company's financial performance and success in meeting its strategic plans. In
making its determinations, the Compensation Committee does not assign any
specific weight to any of the foregoing factors and does not affirmatively
target such base salaries at any particular percentile range in relation to any
other group of comparable companies, but rather considers the entire mix of
factors in the aggregate and makes a subjective determination of what it
considers to be appropriate salary levels. In assessing the base salary of each
of the CEO and the other named executive officers, the Committee has also given
consideration over the past several years to the substantial changes which have
been made in the nature of the Company's business and strategic direction, and
in particular the significant change from primarily a defense industry business
to a software and technology company. The compensation for Mr. Cloughley was
reviewed by the Compensation Committee prior to the commencement of Mr.
Cloughley's employment as CEO on October 28, 1999.
Annual Bonus. Each executive officer, including the CEO, is
eligible for an annual incentive bonus based on achievement of certain results.
Once results are achieved, a percentage of base salary is awarded.
The particular percentage awarded to each executive
officer, including the CEO, is established by the Compensation Committee at the
beginning of each fiscal year based upon the Committee's assessment of (i) the
factors employed to determine base salaries and (ii) the Compensation
Committee's general view (determined without survey data) of the competitiveness
of the executive officer's total compensation, including both base salary and
stock options. In making its determination, the Compensation Committee does not
assign any specific weight to any of the foregoing factors, but rather
subjectively considers the entire mix of factors in the aggregate. Accordingly,
the annual incentive bonus awarded to an executive officer may vary from year to
year. See Summary Compensation Table under the heading "Bonus."
Stock Options. Like annual incentive bonuses, awards of
stock options to executive officers, including the CEO, are intended to align an
officer's interests with shareholder returns and the Company's stock market
performance. Options are granted to the CEO and the other named executive
officers from time to time, but not necessarily annually, based on an assessment
of (i) the factors employed to determine annual incentive bonuses but without
regard to cost containment considerations and (ii) the amount and terms of stock
options already held by the executive officer. In making awards, no specific
weight is assigned to any of the foregoing factors, but rather the entire mix of
factors in the aggregate is subjectively considered. In fiscal 1999, the Board
awarded Mr. Cloughley options to purchase 55,000 shares of Class A Common Stock
at an exercise price of $1.00 per share. Stock Options granted to executive
officers during fiscal 1999 are set forth in the Summary Compensation Table
under the heading "Awards - Securities Underlying Options/SARs" and in the table
captioned "Option/SAR Grants in Last Fiscal Year and Interim Period."
IRC Section 162(m). Section 162(m) of the Internal Revenue
Code limits the tax deduction for any compensation in excess of $1 million for
compensation paid to the CEO or any of the other Named Executive Officers
included in the Summary Compensation Table, unless certain requirements are met.
The Company does not currently believe that present compensation would be
subject to such limitations and it is the Compensation Committee's present
intention to comply with the limits and requirements of Section 162(m). The
Compensation Committee will continue to review this matter.
Compensation Committee
J. C. Rhineberger
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal year 1999, the Company's Compensation Committee
consisted of John Rhineberger, Alexander Adelson and David Batten. None of
Messrs. Rhineberger, Adelson or Batten were executive officers of the Company
during fiscal 1999.
In connection with the May 1, 1997 creation of the uPACS,
LLC (the "LLC") whereby the Company became the minority owner of this limited
liability company, Mr. Adelson received a fee of $30,000 from the LLC. Mr.
Adelson will be entitled to receive, from the LLC, 1% of revenues generated by
the LLC up to the first $45 million in revenues, in consideration of his
services in establishing the LLC and in obtaining the capital funding therefor.
No payments were made to Mr. Adelson under this arrangement in fiscal 1999.
Effective June 9, 1997, the Company and RTS Research Lab,
Inc., a corporation of which Mr. Adelson is the sole owner and principal
("RTS"), entered into a consulting agreement with the Company which replaced and
superseded earlier financial/investment advisory and consulting agreements
between the Company and Mr. Adelson. Under the consulting agreement, Mr.
Adelson, through RTS ("Consultant"), would, for a three year term, provide
investor relations and investor advisory services to the Company, including
providing services as a liaison with the investment community on behalf of the
Company, assisting in developing marketing strategies in connection with the
Company's Medical Technology business and the Company's manufacturing execution
systems products, and assisting in developing and marketing the uPACS(TM)
technology, for which Consultant will receive $257,500 per annum over the term
of the agreement (which, upon mutual agreement of the parties, may alternatively
be satisfied by issuance of options for Class A Common Stock at a rate of an
option for one share of stock for each $200 of compensation) plus an expense
reimbursement and, subject to shareholder approval, a warrant for 9,000 shares
of Class A Common Stock exercisable in three equal installments on each of the
three anniversary dates of the agreement, at an exercise price equal to $50.00,
the market price of the stock on the date of grant. In addition, in the event
that Consultant, with prior Board approval, is successful during the three year
term of the agreement in arranging for additional capital financing for the
Company or in successfully assisting in consummating one or more acquisitions,
Consultant is entitled to receive in connection with any such financing, a
success fee of 1% of the net proceeds plus a warrant for Class A Common Stock
equal to one warrant for each $200 of net proceeds, and in connection with any
such acquisition, a success fee equal to 1/2% of the fair market value of the
net consideration paid by the Company in such acquisition. If approved in
advance by the Board of Directors, the Consultant would receive a success fee of
$100,000 on the sale of the Company or one of its divisions. In no case will
Consultant be entitled to more than $200,000 in success fees in any
eighteen-month period over the term of the agreement. The total fee paid to Mr.
Adelson under this consulting agreement in fiscal 1999 was $193,500, plus
expenses of approximately $2,100. The agreement was terminated on September 30,
1998. The agreement provided for a termination payment equal to one year's fee
of $257,500, which was accrued in the fourth quarter of 1998 and paid in full by
April 1999.
In connection with the Company's $19 million private
placement of Series A Preferred Stock which was consummated in December 1997,
Mr. Adelson received a financial advisory fee of $190,000, plus warrants to
purchase 9,375 shares of Class A Common Stock, exercisable at $62.50 per share,
the market price of Class A Common Stock as of the closing of the initial $9.375
million of such Series A Preferred Stock on December 4, 1997, and a warrant to
purchase 9,625 shares of Class A Common Stock, exercisable at $51.55 per share,
the market price of Class A Common Stock on the closing of the balance of such
private placement on December 31, 1997.
<PAGE>
PERFORMANCE GRAPH
The following graph shows changes over the past five years
in the value of $100 invested on November 1, 1994 in the Company's Class A
Common Stock, the NASDAQ Market Index, MG Industry Group 821 and assumes that
all dividends were reinvested. MG Industry Group 821, Application Software,
Information Technology and Services, Media General Financial Services, P.O. Box
85333, Richmond, Virginia 23293 and is accessible through publications such as
Industriscope and computer databases such as Dialog and Dow Jones News
Retrieval. MG Industry Group 821 includes both the Company's Class A Common
Stock and Class B Common Stock.
<TABLE>
<CAPTION>
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG BASE TEN SYSTEMS, INC. CLASS A COMMON STOCK,
MG GROUP INDEX 821 AND NASDAQ MARKET INDEX
- ------------------------- ----------- ------------ ------------ ---------- ----------- ----------- ----------
11/1/94 10/31/95 10/31/96 10/31/97 10/31/98 12/31/98 12/31/99
----------- ------------ ------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Base Ten - Class A 100 146.46 133.86 182.68 37.40 40.94 5.98
MG Industry Group 821 100 148.52 190.74 285.59 369.24 476.32 911.35
NASDAQ Market Index 100 118.62 139.30 182.56 206.42 256.99 453.26
</TABLE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the formation of the LLC, Jesse L.
Upchurch, a principal shareholder of the Company, contributed $3,000,000 to fund
required further development of the uPACSTM technology. The Company holds a 9%
interest in the LLC and Mr. Upchurch holds a 91% interest in the LLC. The
Company's percentage interest in the LLC will increase if distributions to Mr.
Upchurch reach a certain level. No payments were made to Mr. Upchurch under this
arrangement in fiscal 1999. For services rendered in connection with the
formation of the LLC, Andrew Garrett, Inc. received a commission in the amount
of $90,000 from the LLC. Mr. Drew Sycoff, a principal of Andrew Garrett, Inc.,
is entitled to receive an amount equal to 37% of certain royalties from the LLC
pursuant to a License and Service Agreement between the Company and the LLC
dated as of May 1, 1997. No payments were made to Mr. Sycoff under this
arrangement in fiscal 1999.
The Company and Alexander Adelson, a director of the
Company and a member of the Company's Compensation Committee during fiscal year
1999, were involved in several transactions in which Mr. Adelson had a direct or
indirect material interest. See "Compensation Committee Interlocks and Insider
Participation" for a more detailed description of these transactions.
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, independent certified public
accountants, is the Company's auditors for the 1999 fiscal year. During the
Company's two most recent fiscal years and the subsequent interim period
preceding March 13, 1998, neither the Company, nor anyone acting on the
Company's behalf, consulted with PricewaterhouseCoopers regarding the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report nor oral advice
was provided to the Company by PricewaterhouseCoopers; or matters which would
require disclosure pursuant to Items 304(a)(1)(iv) and 304(a)(1)(v) of
Regulation S-K.
PricewaterhouseCoopers will be represented at the Annual
Meeting. PricewaterhouseCoopers will have the opportunity to make a statement if
they so desire and their representatives are expected to be available to respond
to appropriate questions at the Annual Meeting.
On March 3, 1998, the Company determined that it would no
longer utilize the services of Deloitte & Touche LLP as the principal accountant
to audit the Registrant's financial statements. The reports of Deloitte & Touche
on the Company's financial statements for the past two fiscal years did not
contain an adverse opinion or a disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to dismiss Deloitte & Touche was approved by the Company's Board of
Directors
During the two most recent fiscal years and the subsequent
interim period preceding March 3, 1998, there were no disagreements with
Deloitte & Touche on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Deloitte & Touche's satisfaction, would have caused Deloitte & Touche to make
reference to the subject matter of the disagreement in connection with its
report. During the two most recent fiscal years and the subsequent interim
period preceding March 3, 1998, Deloitte & Touche did not advise the Company of
any matters set forth in Item 304(a)(1)(v) of Regulation S-K. Deloitte & Touche
furnished the Company with a letter addressed to the Securities and Exchange
Commission stating that it agreed with this disclosure, which was filed as an
exhibit to the Company's Current Report on Form 8-K, dated March 3, 1998.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's executive officers and directors to file reports
regarding ownership of the Company's common stock with the SEC and to furnish
the Company with copies of all such filings. Based on a review of these filings
the Company believes that all filings were timely made.
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented for action at the Annual Meeting other than those listed in the Notice
of Annual Meeting and referred to herein. If any other matters properly come
before the Annual Meeting, it is intended that the proxy solicited hereby will
be voted in accordance with the recommendation of the Board of Directors, or if
there is no such recommendation, in the discretion of the proxy committee.
SHAREHOLDERS' PROPOSALS
Shareholders, upon written request to the Secretary of Base
Ten Systems, Inc., One Electronics Drive, P.O. Box 3151, Trenton, NJ 08619, may
receive, without charge, a copy of the Company's Annual Report on Form 10-K, as
amended, including the financial statements and schedules included therein,
required to be filed with the Securities and Exchange Commission for the
Company's fiscal year ended December 31, 1999.
Any shareholder proposals which meet the requirements of
the Securities and Exchange Commission Proxy Rules and intended to be included
in proxy material for consideration at the Company's 2001 Annual Meeting of
Shareholders, must be received by the Secretary of the Company not later than
January 17, 2001.
By order of the Board of Directors,
WILLIAM F. HACKETT
Secretary
May 17, 2000
<PAGE>
EXHIBIT A
BASE TEN SYSTEMS, INC.
1998 STOCK OPTION AND STOCK AWARD PLAN
1. Purpose
The purpose of this Base Ten Systems, Inc. 1998 Stock
Option and Stock Award Plan (the "Plan") is to encourage and enable selected
officers and other key employees of Base Ten Systems Inc. (the "Company") and
its subsidiaries to acquire a proprietary interest in the Company through the
ownership of Class A Common Stock ("Common Stock") of the Company. Such
ownership will provide such employees with a more direct stake in the future
welfare of the Company and encourage them to remain with the Company and its
subsidiaries. It is also expected that the Plan will encourage qualified persons
to seek and accept employment with the Company and its subsidiaries. Pursuant to
the Plan, such employees will be offered the opportunity to acquire such Common
Stock through the grant of options, the award of restricted stock under the
Plan, bonuses payable in stock, or a combination thereof.
As used herein, the term "subsidiary" shall mean any
present or future corporation which is or would be a "subsidiary corporation" of
the Company as the term is defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Administration of the Plan
The Plan shall be administered by the Board of Directors of
the Company or a Compensation Committee as appointed from time to time by the
Board of Directors of the Company ("Board"), which Compensation Committee shall
consist solely of not less than two (2) members of the Board qualifying as
"non-employee directors" under Rule 16b-3 of the Securities Exchange Act of
1934, as it may be amended from time to time (the "Exchange Act"); none of the
members of the Compensation Committee shall be eligible to be granted options or
awarded restricted stock under the Plan or receive bonuses payable in stock. No
member of the Board of Directors shall be appointed to the Compensation
Committee who has been granted an option, awarded restricted stock or received a
bonus payment in stock under the Plan within one year prior to appointment. As
used hereinafter the term "Committee" shall mean (i) the Board of Directors of
the Company at all times that a Compensation Committee is not in existence or
(ii) the Compensation Committee at all times that a Compensation Committee is in
existence.
In administering the Plan, the Committee may adopt rules
and regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees of the Company and its subsidiaries
participating or eligible to participate in the Plan. The Committee may consult
with counsel, who may be of counsel to the Company, and the Committee shall not
incur any liability for any action taken in good faith in reliance upon the
advice of counsel.
The Committee shall determine the employees to whom, and
the time or times at which, grants or awards shall be made and the number of
shares to be included in the grants or awards.
Each option granted pursuant to the Plan shall be evidenced
by an Option Agreement (the "Agreement"). The Agreement shall not be a
precondition to the granting of options; however, no person shall have any
rights under any option granted under the Plan unless and until the optionee to
whom such option shall have been granted shall have executed and delivered to
the Company an Agreement. The Committee shall prescribe the form of the
Agreement. A fully executed original of the Agreement shall be provided to both
the Company and the optionee.
3. Shares of Stock Subject to the Plan
The total number of shares that may be optioned or awarded
under the Plan is 1,100,000 shares of Common Stock plus an additional amount of
shares on May 1 each year, from May 1, 1999 to May 1, 2007, inclusive, equal to
one percent (1%) of the number of shares of Common Stock outstanding on the
immediately preceding April 30 (the "Additional Annual Increment"), of which (i)
30,000 shares plus shares equal to twenty percent (20%) of each Additional
Annual Increment may be awarded as restricted stock and (ii) no more than
900,000 shares may be awarded as Incentive Stock Options, as defined in Section
422 of the Code, except that, notwithstanding any of the foregoing limitations
set forth in this Paragraph 3, said numbers of shares shall be adjusted as
provided in Paragraph 12. Any shares subject to an option which for any reason
expires or is terminated unexercised and any restricted stock which is forfeited
may again be optioned or awarded under the Plan; provided, however, that
forfeited shares shall not be available for further awards if the employee has
realized any benefits of ownership from such shares. Shares subject to the Plan
may be either authorized and unissued shares or issued shares acquired by the
Company or its subsidiaries.
4. Eligibility
Key employees, including officers, of the Company and its
subsidiaries (but excluding members of the Committee), are eligible to be
granted options and awarded restricted stock under the Plan and to have their
bonuses payable in stock. The employees who shall receive awards or options
under the Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in its
sole discretion, the number of shares to be covered by the award or awards and
by the options or options granted to each such employee selected.
5. Duration of the Plan
The Plan shall terminate upon the earlier of the following
dates or events to occur:
(a) upon the adoption of a resolution of the Board
terminating the Plan; or
(b) ten years from the date of adoption of the Plan
by the Board; or
(c) the date all shares of Common Stock subject to
the Plan shall have been purchased according to
the Plan's provisions.
No such termination of the Plan shall affect the rights of
any participant hereunder and all options previously granted and restricted
stock and stock bonus awarded hereunder shall continue in force and in operation
after the termination of the Plan, except as they may be otherwise terminated in
accordance with the terms of the Plan.
6. Terms and Conditions of Stock Options
All options granted under this Plan shall be either
Incentive Stock Options as defined in Section 422 of the Code or options other
than Incentive Stock Options. Each such option shall be subject to all the
applicable provisions of the Plan, including the following terms and conditions,
and to such other terms and conditions not inconsistent therewith as the
Committee shall determine.
(a) The option price per share shall be determined by the
Committee. However, the option price shall not be less than 100% of the fair
market value at the time the option is granted. The fair market value shall be
the closing price of the Common Stock as reported on NASDAQ for the day on which
the option is granted. In the event that the method for determining the fair
market value of the shares provided for in this Paragraph 6(a) shall not for any
reason be practicable, then the fair market value per share shall be determined
by such other reasonable method as the Committee shall, in its discretion,
select and apply at the time of grant of the option concerned.
(b) Each option shall be exercisable during and over such
period ending not later than ten years from the date it was granted, as may be
determined by the Committee and stated in the option.
(c) No option shall be exercisable prior to the expiration
of the period specified by the Committee at the time of grant (the "vesting
period"), which period shall not be less than six (6) months, except as provided
in Paragraphs 6(j), 9 and 12 of the Plan.
(d) Each option shall state whether it will or will not be
treated as an Incentive Stock Option.
(e) Each option may be exercised by giving written notice
to the Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any. Payment shall
be (i) in cash, or (ii) in shares of Common Stock of the Company already owned
by the optionee (the value of such stock shall be its fair market value on the
date of exercise as determined under Paragraph 6(a), or (iii) by a combination
of cash and shares of Common Stock of the Company. No option shall be exercised
for less than the lesser of 50 shares or the full number of shares for which the
option is then exercisable. No optionee shall have any rights to dividends or
other rights of a shareholder with respect to shares subject to his option until
he has given written notice of exercise of his option and paid in full for such
shares. Tax withholding obligations may be met by the withholding of Common
Stock otherwise deliverable to the optionee pursuant to procedures approved by
the Committee. In no event shall Common Stock be delivered to any optionee until
he has paid to the Company in cash the amount of tax required to be withheld by
the Company or has elected to have his tax withholding obligations met by the
withholding of Common Stock in accordance with the procedures approved by the
Committee, except that in the case of later tax dates under Section 83 of the
Code, the Company may deliver Common Stock prior to the optionee's satisfaction
of tax withholding obligations if the optionee makes arrangements satisfactory
to the Company that such obligations will be met on the applicable tax date.
(f) Notwithstanding the foregoing Paragraph 6(e) of the
Plan, each option granted hereunder may provide, or be amended to provide, the
right either (i) to exercise such option in whole or in part without any payment
of the option price, or (ii) to request the Committee to permit, in its sole
discretion, such exercise without any payment of the option price. If an option
is exercised without a payment of the option price, the optionee shall be
entitled to receive that number of whole shares as is determined by dividing (a)
an amount equal to the fair market value per share on the date of exercise as
determined under Paragraph 6(a) into (b) an amount equal to the excess of the
total fair market value of the shares on such date as so determined with respect
to which the option is being exercised over the total cash purchase price of
such shares as set forth in the option. Fractional shares will be rounded to the
next lowest number and the optionee will receive cash in lieu thereof. At the
sole discretion of the Committee, or as specified in the option, the settlement
of all or part of an optionee's rights under this Paragraph 6(f) may be made in
cash in an amount equal to the fair market value of the shares otherwise payable
hereunder. The number of shares with respect to which any option is exercised
under this Paragraph 6(f) shall reduce the number of shares thereafter available
for exercise under the option, and such shares thereafter may not again be
optioned under the Plan.
(g) Each option may provide, or be amended to provide, that
the optionee may exercise the option without payment of the option price by
delivery to the Company of an exercise notice and irrevocable instructions to
deliver shares of Common Stock directly to the brokerage firm named therein in
exchange for payment of the option price and withholding taxes by such brokerage
firm to the Company.
(h) If an optionee's employment by the Company or a
subsidiary terminates by reason of his retirement under a retirement plan of the
Company or a subsidiary, his option may thereafter be exercised whenever the
vesting period has elapsed until the expiration of the stated period of the
option; provided, however, that if the optionee dies after such termination of
employment, any unexercised option may thereafter be immediately exercised in
full by the legal representative of his estate or by the legatee of the optionee
under his last will until the expiration of the stated period of the option;
provided, further, that any right granted to such an optionee pursuant to
Paragraph 6(f) of the Plan, shall terminate on the date of such termination of
employment.
(i) If an optionee's employment by the Company or a
subsidiary terminates by reason of permanent disability, as determined by the
Committee, his option may thereafter be exercised whenever the vesting period
has elapsed until the expiration of the stated period of the option; provided,
however, that if the optionee dies after such termination of employment, any
unexercised option may thereafter be immediately exercised in full by the legal
representative of his estate or by the legatee of the optionee under his last
will until the expiration of the stated period of the option; provided, further,
that any right granted to such an optionee pursuant to Paragraph 6(f) of the
Plan, shall terminate on the date of such termination of employment.
(j) If an optionee's employment by the Company or a
subsidiary terminates by reason of his death, his option may thereafter be
immediately exercised in full by the legal representative of his estate or by
the legatee of the optionee under his last will until the expiration of the
stated period of the option; provided, however, that any right granted to such
an optionee pursuant to Paragraph 6(f) of the Plan, shall terminate on the date
of his death.
(k) Unless otherwise determined by the Committee, if an
optionee's employment terminates for any reason other than death, retirement or
permanent disability, his option shall thereupon terminate.
(l) The option by its terms shall be personal and shall not
be transferable by the optionee otherwise than by will or by the laws of descent
and distribution. During the lifetime of an optionee, the option shall be
exercisable only by him.
(m) Notwithstanding any intent to grant Incentive Stock
Options, an option granted will not be considered an Incentive Stock Option to
the extent that it together with any earlier Incentive Stock Options permits the
exercise for the first time in any calendar year of more than $100,000 in value
of Common Stock (determined at the time of grant).
(n) In the event any option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased optionee, the
Company shall be under no obligation to issue Common Stock thereunder unless and
until the Company is satisfied that the person or persons exercising the option
are the duly appointed legal representative of the deceased optionee's estate or
the proper legatees or distributees thereof.
(o) No Incentive Stock Option shall be granted to an
employee who owns immediately before the grant of such option, directly or
indirectly, stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company. This restriction does not apply if, at the
time such Incentive Stock Option is granted, the option price is at least 110%
of the fair market value of one share of Common Stock, as determined in
Paragraph 6(a), on the date of grant and the Incentive Stock Option by its terms
is not exercisable after the expiration of five years from the date of grant.
7. Terms and Conditions of Restricted Stock Awards
All awards of restricted stock under the Plan shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms and conditions not inconsistent
therewith, as the Committee shall determine.
(a) Awards of restricted stock may be in addition to or in
lieu of option grants.
(b) During a period set by the Committee at the time of
each award of restricted stock (the "restriction period"), the recipient shall
not be permitted to sell, transfer, pledge, or assign the shares of restricted
stock.
(c) Shares of restricted stock shall become free of all
restrictions if the recipient dies or his employment terminates by reason of
permanent disability, as determined by the Committee, during the restriction
period and, to the extent set by the Committee at the time of the award or
later, if the recipient retires under a retirement plan of the Company or a
subsidiary during such period. The Committee may require medical evidence of
permanent disability, including medical examinations by physician(s) selected by
it. If the Committee determines that any such recipient is not permanently
disabled or that a retiree's restricted stock is not to become free of
restrictions, the restricted stock held by either such recipient, as the case
may be, shall be forfeited and revert to the Company. (d) Shares of restricted
stock shall be forfeited and revert to the Company upon the recipient's
termination of employment during the restriction period for any reason other
than death, permanent disability or retirement under a retirement plan of the
Company or a subsidiary except to the extent the Committee, in its sole
discretion, finds that such forfeiture might not be in the best interest of the
Company and, therefore, affirmatively waives in writing all or part of the
application of this provision to the restricted stock held by such recipient.
(e) Stock certificates for restricted stock shall be
registered in the name of the recipient but shall be appropriately legended and
returned to the Company by the recipient, together with a stock power, endorsed
in blank by the recipient. The recipient shall be entitled to vote shares of
restricted stock and shall be entitled to all dividends paid thereon, except
that dividends paid in Common Stock or other property shall also be subject to
the same restrictions.
(f) Restricted stock shall become free of the foregoing
restrictions upon expiration of the applicable restriction period and the
Company shall deliver Common Stock certificates evidencing such stock.
(g) Recipients of restricted stock shall be required to pay
taxes to the Company upon the expiration of restriction periods or such earlier
dates as elected pursuant to Section 83 of the Code; provided, however, tax
withholding obligations may be met by the withholding of Common Stock otherwise
deliverable to the recipient pursuant to procedures approved by the Committee.
In no event shall Common Stock be delivered to any awardee until he has paid to
the Company in cash the amount of tax required to be withheld by the Company or
has elected to have his withholding obligations met by the withholding of Common
Stock in accordance with the procedures approved by the Committee.
8. Bonuses Payable in Stock
In lieu of cash bonuses otherwise payable under the
Company's compensation practices to employees eligible to participate in the
Plan, the Committee, in its sole discretion, may determine that such bonuses
shall be payable in stock or partly in stock and partly in cash. Such bonuses
shall be in consideration of services previously performed and shall consist of
shares of Common Stock free of any restrictions imposed by the Plan. The number
of shares of Common Stock payable in lieu of an amount of each bonus otherwise
payable shall be determined by dividing such amount by the fair market value of
one share of Common Stock on the date the bonus is payable, with the fair market
value determined in accordance with Paragraph 6(a). The Company shall withhold
from any such bonus an amount of cash sufficient to meet its tax withholding
obligations.
9. Limited Rights
Any option granted under the Plan may, at the discretion of
the Committee, contain provisions for limited rights, as described herein. A
limited right shall be exercisable upon the occurrence of an event specified in
the option as an exercise event, and shall expire thirty (30) days after the
occurrence of such event. Exercise events may include, at the discretion of the
Committee and as specified in the option, consummation of a tender or exchange
offer for at least 20% of the Company's Common Stock outstanding at the
commencement of such offer or a proxy contest the result of which is the
replacement of a majority of the members of the Company's Board of Directors, or
consummation of a merger or reorganization of the Company in which the Company
does not survive or in which the shareholders of the Company receive stock or
securities of another corporation or cash, or a liquidation or dissolution of
the Company or other similar events. Limited rights shall permit optionees to
receive in cash either (i) the highest market price per share for each share
covered by an option, without regard to the date on which the option otherwise
would be exercisable, which the Company's Common Stock traded on NASDAQ for the
sixty days immediately preceding the exercise event or (ii) if provided by the
Committee in its discretion at the time of grant, the highest market price per
share for each share covered by the option which the Company's Common Stock
traded on NASDAQ on the date of exercise, less the option price per share
specified in the option. In the event the exercise event is consummation of a
tender or exchange offer, the value per share set by the tenderor or offeror
shall be substituted for the highest market price per share provided in clause
(i) in the preceding sentence. Limited rights shall not extend the exercise
period of any option and, to the extent exercised, shall reduce the shares of
Common Stock available under the Plan and the shares of Common Stock covered by
the options to which the limited rights relate.
10. Transfer, Leave of Absence, Etc.
For the purpose of the Plan: (a) a transfer of an employee
from the Company to a subsidiary, or vice versa, or from one subsidiary to
another, and (b) a leave of absence, duly authorized in writing by the Company,
shall not be deemed a termination of employment.
11. Rights of Employees
(a) No person shall have any rights or claims under the
Plan except in accordance with the provisions of the Plan.
(b) Nothing contained in the Plan shall be deemed to give
any employee the right to be retained in the service of the Company or its
subsidiaries.
12. Changes in Capital
Upon changes in the Common Stock by a stock dividend,
extraordinary dividend payable in cash or property, stock split, reverse split,
subdivision, recapitalization, merger, consolidation (whether or not the Company
is a surviving corporation), combination or exchange of shares, separation,
reorganization or liquidation, the number and class of shares available under
the Plan as to which stock options and restricted stock may be awarded, the
number and class of shares under each option or award and the option price per
share shall be correspondingly adjusted by the Committee, such adjustments to be
made in the case of outstanding options without change in the total price
applicable to such options; provided, however, no such adjustments shall be made
in the case of stock dividends aggregating in any fiscal year of the Company not
more than 5% of the Common Stock issued and outstanding at the beginning of such
year or in the case of one or more splits, subdivisions or combinations of the
Common Stock during any fiscal year of the Company resulting in an increase or
decrease of not more than 5% of the Common Stock issued and outstanding at the
beginning of such year.
In the event of a "Change of Control of the Company" (as
hereinafter defined) (i) all restrictions on restricted stock previously awarded
to recipients under the Plan shall lapse and (ii) all stock options and stock
appreciation rights which are outstanding shall become immediately exercisable
in full without regard to any limitations of time or amount otherwise contained
in the Plan, the options or the rights. Further, in the event of a Change in
Control of the Company, the Committee may determine that the options shall be
adjusted and make such adjustments by substituting for Common Stock subject to
options, stock or other securities of any successor corporation to the Company
that may be issuable by another corporation that is a party to such Change in
Control of the Company if such stock or other securities are publicly traded or,
if such stock or other securities are not publicly traded, by substituting stock
or other securities of a parent or affiliate of such corporation if the stock or
other securities of such parent or affiliate are publicly traded, in which event
the aggregate option price shall remain the same and the amount of shares or
other securities subject to options shall be the amount of shares or other
securities which could have been purchased on the day of the Change in Control
of the Company with the proceeds which would have been received by the optionee
if the option had been exercised in full prior to such Change in Control of the
Company and the optionee had exchanged all of such shares in the Change in
Control transaction. No optionee shall have any right to prevent the
consummation of any of the foregoing acts affecting the number of shares
available to the optionee.
For purposes of the foregoing, a "Change in Control of the
Company" shall be deemed to have occurred upon the occurrence of one of the
following events:
(a) "any person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than
the Company, any employee benefit plan sponsored
by the Company, any trustee or other fiduciary
holding securities under an employee benefit plan
of the Company, or any corporation owned,
directly or indirectly, by the stockholders of
the Company in substantially the same proportion
as their ownership of stock of the Company), is
or becomes (other than pursuant to a transaction
which is deemed to be a "Non-Qualifying
Transaction" under Subsection 12(c)) the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or
more of the combined voting power of the
Company's then outstanding securities eligible to
vote for the election of the Board of Directors
of the Company (the "Company Voting Securities");
or
(b) individuals who, on January 31, 1998, constitute
the Board of Directors of the Company (the
"Incumbent Directors") cease for any reason to
constitute at least a majority of the Board of
Directors of the Company, provided that any
person becoming a director subsequent to January
31, 1998, whose election or nomination for
election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the
Board of Directors of the Company (either by a
specific vote or by approval of the proxy
statement of the Company in which such person is
named as a nominee for director, without written
objection to such nomination) shall be an
Incumbent Director; provided, however, that no
individual initially elected or nominated as a
director of the Company as a result of an actual
or threatened election contest with respect to
directors (including without limitation in order
to settle any such contest) or any other actual
or threatened solicitation of proxies by or on
behalf of any person other than the Board of
Directors of the Company shall be an Incumbent
Director; or
(c) the stockholders of the Company approve a merger,
consolidation, statutory share exchange or
similar form of corporate transaction involving
the Company or any of its subsidiaries that
requires such approval, whether for such
transaction or the issuance of securities in the
transaction (a "Business Combination"), unless
immediately following such Business Combination:
(i) more than 50% of the total voting power of
(x) the corporation resulting from such Business
Combination (the "Surviving Corporation"), or (y)
if applicable, the ultimate parent corporation
that directly or indirectly has beneficial
ownership of 100% of the voting securities
eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), will be
represented by Company Voting Securities that
were outstanding immediately prior to such
Business Combination (or, if applicable, shares
into which such Company Voting Securities were
converted pursuant to such Business Combination),
(ii) no person (other than any employee benefit
plan sponsored or maintained by the Surviving
Corporation or the Parent Corporation) will be or
becomes the beneficial owner, directly or
indirectly, of 25 % or more of the total voting
power of the outstanding voting securities
eligible to elect directors of the Parent
Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (iii)
at least a majority of the members of the board
of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving
Corporation) following the consummation of the
Business Combination were Incumbent Directors at
the time of the approval of the Board of
Directors of the Company of the execution of the
initial agreement providing for such Business
Combination (any Business Combination which
satisfies all of the criteria specified in (i),
(ii) and (iii) above shall be deemed to be a
"Non-Qualifying Transaction"); or
(d) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the
Company or an agreement for the sale or
disposition by the Company of all or
substantially all of the Company's assets.
Anything contained herein to the contrary notwithstanding,
a Change in Control of the Company shall be deemed not to have occurred with
respect to any optionee who participates as an investor in the acquiring entity
(which shall include the Parent Corporation) in any such Change in Control
transaction unless such acquiring entity is a publicly-traded corporation and
the optionee's interest in such acquiring entity immediately prior to the
acquisition constitutes less than one percent (1 %) of both (1) the combined
voting power of such entity's outstanding securities and (2) the aggregate fair
market value of such entity's outstanding equity securities. For this purpose
the optionee's interest in any equity securities shall include any such interest
of which such optionee is a beneficial owner.
13. Use of Proceeds
Proceeds from the sale of shares pursuant to options
granted under this Plan shall constitute general funds of the Company.
14. Amendments
The Board of Directors may amend, alter or discontinue the
Plan, including without limitation any amendment considered to be advisable by
reason of changes to the United States Internal Revenue Code, but no amendment,
alteration or discontinuation shall be made which would impair the rights of any
holder of an award of restricted stock or option or stock bonus theretofore
granted, without his consent, or which, without the approval of the
shareholders, would:
(a) except as is provided in Paragraph 12 of the Plan,
increase the total number of shares reserved for the purpose of the Plan.
(b) except as is provided in Paragraphs 6(f) and 12 of the
Plan, decrease the option price of an option to less than 100% of the fair
market value on the date of the granting of the option.
(c) change the class of persons eligible to receive an
award of restricted stock or options under the Plan; or
(d) extend the duration of the Plan.
The Committee may amend the terms of any award of
restricted stock or option theretofore granted, retroactively or prospectively,
but no such amendment shall impair the rights of any holder without his consent.
15. Miscellaneous Provisions
(a) The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of shares upon exercise of any
option under the Plan.
(b) It is understood that the Committee may, at any time
and from time to time after the granting of an option or the award of restricted
stock or bonuses payable in Common Stock hereunder, specify such additional
terms, conditions and restrictions with respect to such option or stock as may
be deemed necessary or appropriate to ensure compliance with any and all
applicable laws, including, but not limited to, terms, restrictions and
conditions for compliance with federal and state securities laws and methods of
withholding or providing for the payment of required taxes.
(c) If at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of shares of Common
Stock upon any national securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares of Common Stock hereunder, no option or stock appreciation right may be
exercised or restricted stock or stock bonus may be transferred in whole or in
part unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee. (d) The Plan shall be
governed by and construed in accordance with the laws of the State of New
Jersey.
16. Limits of Liability
(a) Any liability of the Company or a subsidiary of the
Company to any Participant with respect to an option or stock or other award
shall be based solely upon contractual obligations created by the Plan and the
Agreement.
(b) Neither the Company nor a subsidiary of the Company,
nor any member of the Committee or the Board, nor any other person participating
in any determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.
<PAGE>
EXHIBIT B
BASE TEN SYSTEMS, INC.
DIRECTORS' STOCK OPTION PLAN
1. Purpose
The purpose of the Base Ten Systems, Inc. Directors' Stock Option
Plan (the "Plan") is to encourage non-employee directors who are not employees
of Base Ten Systems, Inc. (the "Company") to acquire a proprietary interest in
the future of the Company through the ownership of the Class A Common Stock of
the Company ("Common Stock"). It is also expected that the Plan will encourage
qualified persons to serve as directors of the Company.
2. Administration of the Plan
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). In
administering the Plan, the Committee may adopt rules and regulations for
carrying out the Plan. The interpretation and decision with regard to any
question arising under the Plan made by the Committee shall be final and
conclusive on all directors participating or eligible to participate in the
Plan.
Notwithstanding the foregoing, the determination of the directors to
whom, and the time or times at which, options shall be granted and the number of
shares of Common Stock to be included in the grants shall be made by the Board.
3. Shares of Stock Subject to the Plan
The total number of shares that may be issued pursuant to options
granted under the Plan is 340,000 shares of Common Stock, subject to adjustment
as provided in Paragraph 7. Any shares subject to an option, which for any
reason expires or is terminated unexercised may again be subject to an option
under the Plan.
4. Eligibility
Directors who are not employees of the Company or any of its
subsidiaries (including members of the Committee) are eligible to be granted
options under the Plan. The directors who shall receive options under the Plan
shall be selected from time to time by the Board and the Board shall determine
the number of shares to be covered by the option granted to each such director.
5. Duration of the Plan
The Plan is effective as of January 1, 1998. The Plan shall terminate
upon the earliest of the following to occur: (a) the adoption of a resolution by
the Board terminating the Plan, provided, however, that options then outstanding
shall extend beyond such termination date; or (b) the date all shares of Common
Stock subject to options are purchased or all unexercised options have expired.
<PAGE>
6. Terms and Conditions of Stock Options
All options granted under this Plan shall be evidenced by an
agreement between the Company and the optionee and shall be subject to all the
applicable provisions of the Plan, including the following terms and conditions,
and such other terms and conditions not inconsistent therewith as the Committee
shall determine.
(a) The option price per share shall be determined by the
Committee, but shall not be less than 100% of the fair market value of a share
of Common Stock on the date the option is granted. The fair market value shall
be the price for the Common Stock as reported for the day on which the option is
granted. In the event that the method for determining the fair market value of
the Common Stock provided for in this Paragraph 6 (a) shall not be practicable,
then the fair market value per share shall be determined by such other
reasonable method as the Committee shall, in its discretion, select and apply at
the time of grant of the option concerned.
(b) Each option shall be exercisable during and over such
period ending not later than ten years from the date it was granted, as may be
determined by the Board and stated in the option grant agreement.
(c) Options shall be immediately exercisable.
(d) Each option may be exercised by giving written notice
to the Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any. Payment shall
be (i) in cash, or (ii) in shares of Common Stock already owned by the optionee
(the value of such Common Stock shall be its fair market value on the date of
exercise as determined under Paragraph 6 (a)), or (iii) by a combination of cash
and shares of Common Stock. No option shall be exercised for less than the
lesser of 50 shares or the full number of shares for which the option is then
exercisable. No optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to his option until
he has given written notice of exercise of his option and paid in full for such
shares.
(e) Each option may provide, or be amended to provide, that
the optionee may exercise the option without payment of the option price by
delivery to the Company of an exercise notice and irrevocable instructions to
deliver shares of Common Stock directly to the brokerage firm named therein in
exchange for payment of the option price by such brokerage firm to the Company.
(f) Upon an optionee's death, his option may thereafter be
immediately exercised by the legal representative of his estate or by the
legatee of the optionee under his last will until the expiration of the option.
(g) Except as otherwise provided in this paragraph (g) of
Section 6, the option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution. During the lifetime of an optionee, the option shall be
exercisable only by him. The Committee may, in its discretion, authorize any
option to be on terms which permit transfer of all or a portion of such option
to members of the optionee's immediate family or a trust or partnership, or
similar vehicle, established solely for the benefit of, or the partners or
members of which are solely, such family members, provided that the option grant
agreement expressly permits such transferability and any transfer of such option
shall be in accordance with any other terms, conditions, rules and limitations
prescribed by the Committee and/or set forth in the applicable option grant
agreement. Following the valid transfer of any such option, the transferred
option shall continue to be subject to the same terms and conditions as were
applicable to such option immediately prior to such transfer, provided that the
transferee of such option shall be treated under the Plan and the applicable
agreement as the optionee.
7. Changes in Capital/Change in Control
Upon changes in the Common Stock by a stock dividend, stock split,
reverse split, subdivision, recapitalization, merger, consolidation (whether or
not the Company is a surviving corporation), combination or exchange of shares,
separation, reorganization or liquidation, the number and class of shares
available under the Plan as to which options may be granted, the number and
class of shares under each option and the option price per share shall be
correspondingly adjusted by the Committee, such adjustments to be made in the
case of outstanding options without change in the total price applicable to such
options; provided, however, no such adjustments shall be made in the case of
stock dividends aggregating in any fiscal year of the Company not more than 5%
of the Common Stock issued and outstanding at the beginning of such year or in
the case of one or more splits, subdivisions or combinations of the Common Stock
during any fiscal year of the Company resulting in an increase or decrease of
not more than 5% of the Common Stock issued and outstanding at the beginning of
such year.
8. Use of Proceeds
Proceeds from the sale of shares pursuant to options granted under
this Plan shall constitute general funds of the Company.
9. Amendments
The Board may amend, alter or discontinue the Plan, including without
limitation any amendment considered to be advisable by reason of changes to the
Internal Revenue Code, but no amendment, alteration or discontinuation shall be
made which would impair the rights of any holder of an option theretofore
granted, without his consent, or which, without the approval of the
shareholders, would:
(a) Except as is provided in Paragraph 7 of the Plan,
increase the total number of shares reserved for the purpose of the Plan.
(b) Decrease the option price to less than 100% of the fair
market value of a share of Common Stock on the date of the granting of the
option.
The Committee may amend the terms of any option heretofore granted,
retroactively or prospectively, but no such amendment shall impair the rights of
any holder without his consent.
10. Governing Law
The Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey.
CLASS A BASE TEN SYSTEMS, INC. CLASS A
Proxy solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting of Shareholders on May 31, 2000
The undersigned hereby constitutes and appoints Robert Hurwitz
and William F. Hackett, and each of them, true and lawful agents and proxies,
with full power of substitution in each, to represent the undersigned and vote,
as directed, all shares of Class A Common Stock which the undersigned may be
entitled to vote, at the Annual Meeting of Shareholders of Base Ten Systems,
Inc. to be held at the Company's offices at One Electronics Drive, Trenton, New
Jersey, 08619, on Wednesday, May 31, 2000, at 11:00 a.m., and at any
adjournments or postponements thereof, on all matters coming before said
meeting.
You are encouraged to specify your choice by marking the
appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish
to vote in accordance with the Board of Directors' recommendations. Your shares
cannot be voted by the persons named above as proxies unless you sign and return
this card.
The shares represented by this Proxy will be voted in the
manner directed and, if no instructions to the contrary are indicated, will be
voted FOR approval of the proposals set forth in the Notice of Annual Meeting of
Shareholders.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE. YOU MAY REVOKE THIS PROXY AT ANY TIME BY FORWARDING TO THE COMPANY A
SUBSEQUENTLY DATED PROXY RECEIVED BY THE COMPANY PRIOR TO THE TAKING OF A VOTE
ON THE MATTERS HEREIN.
(continued, and to be signed on reverse side)
<PAGE>
Please date, sign and mail your proxy card back as soon as possible
Annual Meeting of Shareholders
BASE TEN SYSTEMS, INC.
Class A
A |X| Please mark your votes as in this example.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished herewith and hereby revokes any
proxy or proxies heretofore given.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" EACH OF THE
FOLLOWING:
For Withheld
1. Election of Directors.
|_| |_|
Nominees: Stephen A. Cloughley
William F. Hackett
For, except vote withheld from the following nominee:
-------------------------------------------
For Against Abstain
2. Approval of proposed increase in authorized
Class A Common Stock from 12 million shares
to 27 million shares. |_| |_| |_|
3. Approval of the amendment to the 1998 Stock
Option and Stock Award Plan. |_| |_| |_|
4. Approval of the amendment to the 1998 Director
Stock Option Plan |_| |_| |_|
Signature (Title, if any)_____________________________________
Date _______________________________, 2000
Signature (if held jointly)____________________________________
Date _______________________________, 2000
NOTE: Please print and sign your name exactly as it appears hereon. When
signing as attorney, agent, executor, administrator, trustee, guardian or
corporate officer, please give full title as such. Each joint owner should
sign the Proxy. If a corporation, please sign in full corporate name by
president or authorized officer. If a partnership, please sign in
partnership name by authorized person.
CLASS B BASE TEN SYSTEMS, INC. CLASS B
Proxy solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting of Shareholders on May 31, 2000
The undersigned hereby constitutes and appoints Robert Hurwitz
and William F. Hackett, and each of them, true and lawful agents and proxies,
with full power of substitution in each, to represent the undersigned and vote,
as directed, all shares of Class B Common Stock which the undersigned may be
entitled to vote, at the Annual Meeting of Shareholders of Base Ten Systems,
Inc. to be held at the Company's offices at One Electronics Drive, Trenton, New
Jersey, 08619, on Wednesday, May 31, 2000, at 11:00 a.m., and at any
adjournments or postponements thereof, on all matters coming before said
meeting.
You are encouraged to specify your choice by marking the
appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish
to vote in accordance with the Board of Directors' recommendations. Your shares
cannot be voted by the persons named above as proxies unless you sign and return
this card.
The shares represented by this Proxy will be voted in the
manner directed and, if no instructions to the contrary are indicated, will be
voted FOR approval of the proposals set forth in the Notice of Annual Meeting of
Shareholders.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE. YOU MAY REVOKE THIS PROXY AT ANY TIME BY FORWARDING TO THE COMPANY A
SUBSEQUENTLY DATED PROXY RECEIVED BY THE COMPANY PRIOR TO THE TAKING OF A VOTE
ON THE MATTERS HEREIN.
(continued, and to be signed on reverse side)
<PAGE>
Please date, sign and mail your proxy card back as soon as possible
Annual Meeting of Shareholders
BASE TEN SYSTEMS, INC.
Class B
A |X| Please mark your votes as in this example.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished herewith and hereby revokes any
proxy or proxies heretofore given.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" EACH OF THE
FOLLOWING:
For Withheld
1. Election of Directors.
|_| |_|
Nominees: Stephen A. Cloughley
William F. Hackett
For, except vote withheld from the following nominee:
-------------------------------------------
For Against Abstain
2. Approval of proposed increase in authorized
Class A Common Stock from 12 million shares
to 27 million shares. |_| |_| |_|
3. Approval of the amendment to the 1998 Stock
Option and Stock Award Plan. |_| |_| |_|
4. Approval of the amendment to the 1998 Director
Stock Option Plan |_| |_| |_|
Signature (Title, if any)_____________________________________
Date _______________________________, 2000
Signature (if held jointly)____________________________________
Date _______________________________, 2000
NOTE: Please print and sign your name exactly as it appears hereon. When
signing as attorney, agent, executor, administrator, trustee, guardian or
corporate officer, please give full title as such. Each joint owner should
sign the Proxy. If a corporation, please sign in full corporate name by
president or authorized officer. If a partnership, please sign in
partnership name by authorized person.
SERIES B PREFERRED BASE TEN SYSTEMS, INC. SERIES B PREFERRED
Proxy solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting of Shareholders on May 31, 2000
The undersigned hereby constitutes and appoints Robert Hurwitz
and William F. Hackett, and each of them, true and lawful agents and proxies,
with full power of substitution in each, to represent the undersigned and vote,
as directed, all shares of Series B Preferred Stock which the undersigned may be
entitled to vote, at the Annual Meeting of Shareholders of Base Ten Systems,
Inc. to be held at the Company's offices at One Electronics Drive, Trenton, New
Jersey, 08619, on Wednesday, May 31, 2000, at 11:00 a.m., and at any
adjournments or postponements thereof, on all matters coming before said
meeting.
You are encouraged to specify your choice by marking the
appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish
to vote in accordance with the Board of Directors' recommendations. Your shares
cannot be voted by the persons named above as proxies unless you sign and return
this card.
The shares represented by this Proxy will be voted in the
manner directed and, if no instructions to the contrary are indicated, will be
voted FOR approval of the proposals set forth in the Notice of Annual Meeting of
Shareholders.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE. YOU MAY REVOKE THIS PROXY AT ANY TIME BY FORWARDING TO THE COMPANY A
SUBSEQUENTLY DATED PROXY RECEIVED BY THE COMPANY PRIOR TO THE TAKING OF A VOTE
ON THE MATTERS HEREIN.
(continued, and to be signed on reverse side)
<PAGE>
Please date, sign and mail your proxy card back as soon as possible
Annual Meeting of Shareholders
BASE TEN SYSTEMS, INC.
Class A
A |X| Please mark your votes as in this example.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished herewith and hereby revokes any
proxy or proxies heretofore given.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" EACH OF THE
FOLLOWING:
For Withheld
1. Election of Directors.
|_| |_|
Nominees: Stephen A. Cloughley
William F. Hackett
For, except vote withheld from the following nominee:
-------------------------------------------
For Against Abstain
2. Approval of proposed increase in authorized
Class A Common Stock from 12 million shares
to 27 million shares. |_| |_| |_|
3. Approval of the amendment to the 1998 Stock
Option and Stock Award Plan. |_| |_| |_|
4. Approval of the amendment to the 1998 Director
Stock Option Plan |_| |_| |_|
Signature (Title, if any)_____________________________________
Date _______________________________, 2000
Signature (if held jointly)____________________________________
Date _______________________________, 2000
NOTE: Please print and sign your name exactly as it appears hereon. When
signing as attorney, agent, executor, administrator, trustee, guardian or
corporate officer, please give full title as such. Each joint owner should
sign the Proxy. If a corporation, please sign in full corporate name by
president or authorized officer. If a partnership, please sign in
partnership name by authorized person.
