<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
ATL PRODUCTS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
ATL PRODUCTS, INC.
TO BE HELD SEPTEMBER 4, 1997
------------------------
To the Stockholders of ATL Products, Inc.:
The Annual Meeting of the Stockholders of ATL Products, Inc., a Delaware
corporation (the "Company"), will be held at the Company's principal executive
offices located at 2801 Kelvin Avenue, Irvine, California, on Thursday,
September 4, 1997 at 10:00 a.m., Pacific Daylight Time, for the following
purposes:
1. To elect a Board of four directors to serve on the Company's Board
of Directors;
2. To consider and approve the Company's 1997 Stock Incentive Plan,
including the reservation of 200,000 shares for issuance
thereunder;
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 1998; and
4. To transact any other business which may properly come before the
Annual Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on July 31, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting and at any continuation or adjournment thereof. A
list of stockholders entitled to vote at the Annual Meeting will be available
for inspection at the Company's principal executive offices.
You are cordially invited to attend the Annual Meeting in person. Even if
you plan to attend the Annual Meeting, please promptly mark, sign, date and
return the enclosed proxy card in the envelope provided herewith. If you decide
to attend the Annual Meeting and wish to change your proxy vote, you may do so
at the Annual Meeting.
Please read the enclosed proxy material carefully. Your vote is important.
The Company appreciates your cooperation in considering and acting on the
matters presented.
Dated: August 4, 1997 By Order of the Board of Directors
JAMES A. PIPP
Secretary
IT IS IMPORTANT THAT YOU COMPLETE AND RETURN THE ENCLOSED PROXY CARD. YOUR
COOPERATION IN PROMPTLY RETURNING YOUR SIGNED PROXY CARD CAN HELP THE COMPANY
AVOID THE EXPENSE OF DUPLICATE PROXY SOLICITATIONS.
<PAGE> 3
STOCKHOLDERS SHOULD READ THE ENTIRE PROXY STATEMENT
CAREFULLY PRIOR TO RETURNING THEIR PROXIES
------------------------
ATL PRODUCTS, INC.
PROXY STATEMENT
ANNUAL MEETING OF THE STOCKHOLDERS
TO BE HELD SEPTEMBER 4, 1997
------------------------
GENERAL
These proxy materials and the enclosed proxy card are being furnished in
connection with the solicitation of proxies by the Board of Directors of ATL
Products, Inc., a Delaware corporation (the "Company"), to be voted at the
Annual Meeting of Stockholders of the Company to be held on September 4, 1997 at
10:00 a.m., Pacific time, or any adjournment or postponement thereof (the
"Annual Meeting"). These proxy materials and the related form of proxy were
first mailed to the Company's stockholders on or about August 6, 1997.
The mailing address of the Company's principal executive offices is 2801
Kelvin Avenue, Irvine, California 92614.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of the
Stockholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS
The record date for determining those stockholders who are entitled to
notice of, and to vote at the Annual Meeting has been fixed as July 31, 1997. At
the close of business on the record date, 9,655,000 shares of the Company's
Class A Common Stock were outstanding and no shares of the Company's Class B
Common Stock were outstanding. Each share of Class A Common Stock is entitled to
one vote on all matters brought before the Annual Meeting.
A majority of the outstanding shares of Class A Common Stock entitled to
vote at the Annual Meeting will constitute a quorum. The Company's inspector of
elections for the Annual Meeting will count abstentions and broker nonvotes
(shares held by a broker or other nominee having discretionary power to vote on
some matters but not others) for purposes of determining whether a quorum exists
for the transaction of business at the Annual Meeting. Abstentions are also
counted in tabulating the total number of votes cast on matters voted on by the
stockholders at the Annual Meeting. Broker nonvotes are not counted for purposes
of determining either the number of votes cast on any matter voted on by the
stockholders or whether such matter has been approved.
Properly executed proxies will be voted in the manner directed by the
stockholders. If no direction is made on proxies, such proxies will be voted FOR
the election of all nominees named under the caption "Election of Directors" as
directors of the Company, FOR the approval of the 1997 Stock Incentive Plan and
the reservation of 200,000 shares for issuance thereunder, and FOR the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending March 31, 1998.
At the record date, Odetics, Inc., a Delaware corporation ("Odetics"), was
the beneficial owner of an aggregate of 8,005,000 shares of Class A Common Stock
constituting approximately 82.9% of the total voting power of all of the
outstanding securities of the Company which are entitled to vote at the Annual
Meeting. Management of Odetics has indicated to the Company that Odetics intends
to vote or direct the vote of all shares of Class A Common Stock beneficially
owned by Odetics in favor of all of the proposals. See "Principal Stockholders
and Common Stock Ownership of Management."
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REVOCABILITY OF PROXIES
Any stockholder executing a proxy has the power to revoke it at any time
before it is voted by filing with the Company's Secretary, at the Company's
principal executive office, a written notice of revocation or a new duly
executed proxy bearing a date later than the date indicated on the previous
proxy. Proxies may also be revoked by any stockholder present at the Annual
Meeting who elects to vote his or her shares in person. Attendance at the
meeting will not, by itself, revoke a proxy.
SOLICITATION
The enclosed proxy is being solicited by the Company's Board of Directors.
The Company will bear the entire cost of proxy solicitation, including costs of
preparing, assembling, printing and mailing this Proxy Statement, the proxy card
and any additional material furnished to the stockholders. Copies of the
solicitation materials will be furnished to brokerage houses and others to
forward to the beneficial owners. The Company may reimburse such persons for
their expenses in forwarding solicitation materials. Solicitation will be made
primarily through the use of the mail, but may be supplemented by telephone,
telegram or personal solicitation by directors, officers or other regular
employees of the Company.
In the discretion of management, the Company reserves the right to retain a
professional firm of proxy solicitors to assist in solicitation of proxies.
Although management does not currently expect to retain such a firm, it
estimates that the fees of such firm would range from $5,000 to $10,000 plus
out-of-pocket expenses, all of which would be paid by the Company.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
A Board of four directors is to be elected at the Annual Meeting to hold
office until their successors are duly elected and have qualified. Each returned
proxy cannot be voted for a greater number of persons than the nominees named
(four). Unless individual stockholders specify otherwise, each returned proxy
will be voted for the election of the four nominees who are listed below. If,
however, any of the nominees named herein is unable to serve or declines to
serve at the time of the Annual Meeting, the persons named in the enclosed proxy
will exercise discretionary authority to vote for substitutes. The Board of
Directors is not aware of any circumstances which would render any nominee
unavailable for election.
The following table sets forth certain information concerning the nominees
for directors of the Company as of July 15, 1997.
<TABLE>
<CAPTION>
FIRST YEAR
NAME AGE PRINCIPAL OCCUPATION ELECTED DIRECTOR
- ------------------------ --- ------------------------------------------- ----------------
<S> <C> <C> <C>
Kevin C. Daly, Ph.D. 53 Chairman of the Board, President and 1993
Chief Executive Officer of the Company
Vice President and Chief Technology Officer
of Odetics
Joel Slutzky(1) 58 Chairman of the Board and Chief Executive 1993
Officer of Odetics
Crandall Gudmundson(1) 66 President of Odetics 1993
Paul E. Wright(2) 66 President of Wright --
Associates -- Engineering
and Business Consultants
</TABLE>
- ---------------
(1) Member of the Audit Committee and the Compensation Committee.
(2) It is anticipated that Mr. Wright, if elected to the Board, will be
appointed to the Audit Committee and the Compensation Committee immediately
following the Annual Meeting.
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Kevin C. Daly, Ph.D. has served as President and Chief Executive Officer
and a member of the Board of Directors of the Company since its formation in
January 1993, and Chairman of the Board since December 1996. Dr. Daly has also
served as a member of the Board of Directors of Odetics since June 1993 and as
Vice President and Chief Technical Officer of Odetics from 1987 to 1997. Prior
to that, Dr. Daly served as the Director of Space Systems of Odetics since 1985
when he joined Odetics. From March 1974 until June 1985, Dr. Daly served as the
Director of the Control and Dynamics Division of the Charles Stark Draper
Laboratory. During that period, Dr. Daly participated in the design and
development of guidance, navigation and control systems for several major space
programs including the United States Space Shuttle program. Dr. Daly served as a
manager of electronic systems for a major space program of the United States Air
Force from March 1970 to March 1974. Dr. Daly has also served on several
advisory committees to the United States Government.
Joel Slutzky has served as a director of the Company since its formation in
January 1993. Mr. Slutzky has served as Chairman of the Board and Chief
Executive Officer of Odetics since he founded Odetics in 1969. From May 1993
until January 1994, Mr. Slutzky also served as the Chief Financial Officer of
Odetics, and as President of Odetics from 1969 to 1975. Prior to founding
Odetics, Mr. Slutzky was an engineering manager at Leach Corporation, now part
of the Lockheed Electronics Division of Lockheed Corporation.
Crandall Gudmundson has served as a director of the Company since 1993. Mr.
Gudmundson is a cofounder of Odetics, has served as President of Odetics since
1975 and has been a director of Odetics since 1979. Mr. Gudmundson has also
served as a director of Odetics since 1969. Prior to co-founding Odetics, Mr.
Gudmundson was the lead project engineer for Leach Corporation. Mr. Gudmundson
has announced his intent to retire from Odetics during fiscal 1998.
Paul E. Wright was appointed as a director of the Company in July 1997. Mr.
Wright is the President of Wright Associates -- Engineering and Business
Consultants, a company he formed in 1997. Mr. Wright served as the Chairman of
Chrysler Technologies Corp., the aerospace and defense electronics subsidiary of
Chrysler Corporation, from 1988 until his retirement in 1997. From 1986 to 1988,
Mr. Wright served as President and Chief Operating Officer of Fairchild
Industries, Inc. Prior to joining Fairchild, he was employed for 28 years by RCA
Corporation, where he last served as the Senior Vice President responsible for
planning RCA's merger into General Electric Corporation. Mr. Wright has also
served as a director of Odetics since 1993.
All directors currently are elected annually and hold office until the next
Annual Meeting of the Stockholders and until their successors are duly elected
and qualified.
COMPENSATION OF DIRECTORS
The directors currently do not receive compensation for serving on the
Board of Directors or any committee thereof, but are reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board and any
committee thereof. The Company intends to implement a new program to provide
cash compensation to its outside directors during fiscal 1998; however, terms of
such program have not yet been established. Nonemployee directors, however, will
be eligible to receive periodic option grants pursuant to the Automatic Option
Grant Program under the proposed 1997 Stock Incentive Plan (the "1997 Plan").
Under this plan as proposed, each nonemployee director will receive an option to
purchase 10,000 shares of Class A Common Stock in connection with his initial
appointment to the Board of Directors and an additional option to purchase 5,000
shares on the date of each Annual Meeting thereafter. Each such option will have
an exercise price equal to the fair market value per share of the Class A Common
Stock on the grant date and will have a maximum term of ten years, subject to
earlier termination following the optionee's cessation of service as a Board
member. See "1997 Stock Incentive Plan."
BOARD MEETINGS AND COMMITTEES
The Company has two standing committees, the Compensation Committee and the
Audit Committee, both of which were formed after fiscal 1997 upon the completion
of the Company's initial public offering. The
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Company has no standing nominating committee, and the Board as a whole acts upon
matters which would otherwise be the responsibility of a nominating committee.
The Audit Committee will supervise and review the audit and audit review
programs and procedures of the Company's independent auditors, the Company's
internal accounting staff and the results of internal auditing procedures. The
Audit Committee will also review the independence, professional services, fees,
plans and results of the independent auditors' engagement, and will recommend
their retention or discharge to the Board. The members of the Company's Audit
Committee are Messrs. Gudmundson and Slutzky. The Audit Committee did not hold
any meetings during the fiscal year ended March 31, 1997.
The Compensation Committee will make recommendations to the Board
concerning the compensation of all officers of the Company and will administer
the Company's stock option plans. The members of the Company's Compensation
Committee are Messrs. Gudmundson and Slutzky. The Compensation Committee did not
hold any meetings during the fiscal year ended March 31, 1997.
The Board of Directors met a total of three times during the fiscal year
ended March 31, 1997. Each of the directors nominated for reelection attended at
least 75% of the total number of meetings of the Board of Directors.
STOCKHOLDER APPROVAL
The affirmative vote of the holders of a plurality of the outstanding
shares of Class A Common Stock present or represented at the Annual Meeting is
required for approval of the election of the nominees as members of the Board of
Directors of the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL FOUR OF THE NOMINEES
LISTED ABOVE. PROXIES RETURNED TO THE COMPANY WILL BE VOTED "FOR" EACH NOMINEE
UNLESS OTHERWISE INSTRUCTED IN WRITING ON SUCH PROXY.
PROPOSAL NO. 2
APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve the 1997 Stock
Incentive Plan (the "1997 Plan") pursuant to which 200,000 shares of the
Company's Class A Common Stock will be reserved for issuance. The Board of
Directors has authorized the implementation of the 1997 Plan as a comprehensive
equity incentive program to attract and retain the services of those individuals
essential to the Company's growth and financial success. The 1997 Plan will
become effective upon the approval of the stockholders at the 1997 Annual
Meeting (the "Effective Date").
DESCRIPTION OF THE 1997 PLAN
The following is a summary of the principal features of the 1997 Plan. The
summary does not, however, purport to be a complete description of all the
provisions of the 1997 Plan. Any stockholder of the Company who wishes to obtain
a copy of the actual plan document may do so upon written request to the
Secretary at the Company's principal executive offices in Irvine, California.
STRUCTURE. The 1997 Plan will contain three separate equity incentive
programs: (i) a Discretionary Option Grant Program, (ii) a Stock Issuance
Program, and (iii) an Automatic Option Grant Program. The principal features of
each program are described below. The Compensation Committee of the Board will
serve as the initial Plan Administrator with respect to the Discretionary Option
Grant and Stock Issuance Programs. However, one or more additional Board
committees may be appointed to administer those programs with respect to certain
designated classes of individuals in the Company's service. The term "Plan
Administrator" as used in this summary will mean the Compensation Committee and
any other appointed committee acting
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within the scope of its administrative authority under the 1997 Plan.
Administration of the Automatic Option Grant Program will be self-executing in
accordance with the express provisions of such program.
SHARE RESERVE. The maximum number of shares reserved for issuance under the
1997 Plan will be limited to 200,000 shares of the Company's Class A Common
Stock. In no event may any one participant in the 1997 Plan be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 50,000 shares in the aggregate per calendar year.
Shares subject to any outstanding options under the 1997 Plan which expire
or otherwise terminate prior to exercise will be available for subsequent option
grants and direct issuances. Unvested shares issued under the 1997 Plan and
subsequently repurchased by the Company, at the exercise price or direct issue
price paid per share, pursuant to its repurchase rights under the 1997 Plan will
also be available for subsequent issuance. However, shares subject to any option
surrendered in accordance with the stock appreciation right provisions of the
1997 Plan will not be available for subsequent issuance.
ELIGIBILITY. Officers and employees, nonemployee Board members and
independent consultants and advisors in the service of the Company or its parent
and subsidiaries (whether now existing or subsequently established) will be
eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs. Only nonemployee members of the Board will be eligible to participate
in the Automatic Option Grant Program.
As of July 15, 1997, seven executive officers, 187 other employees, and two
nonemployee Board members were eligible to participate in the 1997 Plan.
VALUATION. The fair market value per share of Class A Common Stock on any
relevant date under the 1997 Plan will be the closing sales price per share on
that date on the Nasdaq National Market. On July 15, 1997, the closing sales
price per share of Class A Common Stock was $11 1/4.
DISCRETIONARY OPTION GRANT PROGRAM
GRANTS. The Plan Administrator has complete discretion under the
Discretionary Option Grant Program to determine which eligible individuals are
to receive option grants, the time or times when such grants are to be made, the
number of shares subject to each such grant, the status of any granted option as
either an incentive stock option or a nonstatutory option under the federal tax
laws, the vesting schedule (if any) to be in effect for the option grant and the
maximum term for which any granted option is to remain outstanding.
PRICE AND EXERCISABILITY. Each granted option will have an exercise price
per share not less than one hundred percent (100%) of the fair market value per
share of Class A Common Stock on the option grant date, and no granted option
will have a term in excess of ten (10) years. The option will generally become
exercisable in a series of installments over a specified period of service
measured from the grant date.
The exercise price may be paid in cash or in shares of the Class A Common
Stock. Outstanding options may also be exercised through a same day sale program
pursuant to which a designated brokerage firm is to effect an immediate sale of
the shares purchased under the option and pay over to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
exercise price for the purchased shares plus all applicable withholding taxes.
No optionee will have any stockholder rights with respect to the option
shares until such optionee has exercised the option and paid the exercise price
for the purchased shares. Options are generally not assignable or transferable
other than by will or the laws of inheritance and, during the optionee's
lifetime, the option may be exercised only by such optionee. The Plan
Administrator may, however, allow nonstatutory options to be transferred or
assigned during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more of such
family members, to the extent such transfer or assignment is in furtherance of
the optionee's estate plan.
TERMINATION OF SERVICE. Upon the optionee's cessation of employment or
service, the optionee will have a limited period of time in which to exercise
his or her outstanding options for any shares which have vested at that time.
However, at any time while the options remain outstanding, the Plan
Administrator will have
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complete discretion to extend the period during which those options may be
exercised following the optionee's cessation of service. The Plan Administrator
will also have complete discretion to accelerate the exercisability or vesting
of those options in whole or in part at any time.
STOCK APPRECIATION RIGHTS. The Plan Administrator is authorized to issue
two types of stock appreciation rights in connection with option grants made
under the Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Class A Common Stock subject to the surrendered option less (b)
the aggregate exercise price payable for those shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Class A Common Stock.
Limited stock appreciation rights may be provided to one or more
officers of the Company as part of their option grants. Any option with
such a limited stock appreciation right may be surrendered to the Company
upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting stock. In return
for the surrendered option, the officer will be entitled to a cash
distribution from the Company in an amount per surrendered option share
equal to the excess of (a) the highest price per share of Class A Common
Stock paid in connection with the tender offer less (b) the exercise price
payable for such share.
CANCELLATION/REGRANT PROGRAM. The Plan Administrator will have the
authority to effect the cancellation of outstanding options under the
Discretionary Option Grant Program and to issue replacement options with an
exercise price equal to the fair market value per share of Class A Common Stock
at the time of the new grant.
STOCK ISSUANCE PROGRAM
Shares of Class A Common Stock may be sold under the Stock Issuance Program
at a price per share not less than one hundred percent (100%) of their fair
market value, payable in cash or through a promissory note payable to the
Company. Shares may also be issued as a bonus for past services. The shares
issued as a bonus for past services will be fully vested upon issuance. All
other shares issued under the program will be subject to a vesting schedule tied
to the performance of service or the attainment of performance goals. The Plan
Administrator will, however, have the discretionary authority at any time to
accelerate the vesting of any and all unvested shares outstanding under the 1997
Plan.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, nonemployee Board members will
receive option grants at specified intervals over their period of Board service.
All grants under the Automatic Option Grant Program will be made in strict
compliance with the express provisions of such program, and stockholder approval
of this Proposal will also constitute pre-approval of each option granted
pursuant to the provisions of the Automatic Option Grant Program summarized
below and the subsequent exercise of that option in accordance with such
provisions.
GRANTS. Each individual serving as a nonemployee Board member on the
Effective Date of the 1997 Plan will automatically be granted on that date a
nonstatutory option to purchase 10,000 shares of Class A Common Stock. Each
individual who first becomes a nonemployee Board member on or after the
Effective Date, whether through election by the stockholders or appointment by
the Board, will automatically be granted, at the time of such initial election
or appointment, a nonstatutory option to purchase 10,000 shares of Class A
Common Stock, provided such individual has not previously been in the Company's
employ.
On the date of each Annual Meeting, beginning with the 1998 Annual Meeting,
each individual who is to continue to serve as a nonemployee Board member,
whether or not such individual is standing for re-election at that particular
Annual Meeting, will automatically be granted a nonstatutory option to purchase
5,000 shares of Class A Common Stock, provided such individual has served as a
nonemployee Board member for at least six months. There will be no limit on the
number of such 5,000 share option grants any one
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nonemployee Board member may receive over his or her period of Board service,
and nonemployee Board members who have previously been employed by the Company
will be eligible to receive one or more of those annual grants.
EXERCISE/VESTING. Each automatic option grant will have an exercise price
per share equal to 100% of the fair market value per share of Class A Common
Stock on the grant date and a maximum term of ten years measured from such date.
Each option will be immediately exercisable for all of the option shares. Any
shares purchased under the option will, however, be subject to repurchase by the
Company at the exercise price paid per share upon the optionee's cessation of
Board service prior to vesting in those shares. The shares of Class A Common
Stock subject to each initial 10,000 share grant will vest in a series of four
successive equal annual installments over the optionee's period of continued
Board service measured from the automatic grant date, and the shares subject to
each annual 5,000 share grant will vest in full upon the optionee's completion
of one year of Board service measured from the grant date.
Each automatic option will remain exercisable for a twelve month period
following the optionee's cessation of service as a Board member. In no event,
however, may the option be exercised after the expiration date of the option
term. During the applicable post-service exercise period, the option may not be
exercised for more than the number of option shares (if any) in which the Board
member is vested at the time of his or her cessation of Board service.
SPECIAL VESTING. The shares subject to each automatic option grant will
immediately vest upon (i) the optionee's death or permanent disability while a
Board member, (ii) an acquisition of the Company by merger or asset sale, (iii)
the successful completion of a tender offer for more than 50% of the Company's
outstanding voting stock, or (iv) a change in the majority of the Board effected
through one or more contested elections for Board membership.
STOCK APPRECIATION RIGHTS. Upon the successful completion of a hostile
tender offer for more than 50% of the Company's outstanding voting stock, each
outstanding automatic option grant may be surrendered to the Company for a cash
distribution per surrendered option share in an amount equal to the excess of
(a) the highest price per share of Class A Common Stock paid in connection with
such tender offer less (b) the exercise price payable for such share.
Stockholder approval of this Proposal will constitute preapproval of each option
granted with such a surrender right and the subsequent surrender of that option
in accordance with the foregoing provisions. No additional approval of the 1997
Plan Administrator or the Board will be required at the time of the actual
option surrender and cash distribution.
The remaining terms and conditions of each automatic option grant will, in
general, conform to the terms summarized above for option grants made under the
Discretionary Option Grant Program and will be incorporated into the option
agreement evidencing the automatic grant.
GENERAL
ACCELERATION. In the event that the Company is acquired by merger or asset
sale, each outstanding option under the Discretionary Option Grant Program which
is not to be assumed by the successor corporation will automatically accelerate
in full, and all unvested shares under the Discretionary Option Grant and Stock
Issuance Programs will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. The Plan Administrator will have complete discretion to
grant one or more options under the Discretionary Option Grant Program which
will become fully exercisable for all the option shares in the event those
options are assumed in the acquisition and the optionee's service with the
Company or the acquiring entity terminates within a designated period following
such acquisition. The Plan Administrator also has the authority to grant options
which will immediately vest upon an acquisition of the Company, whether or not
those options are assumed by the successor corporation. The vesting of
outstanding shares under the Stock Issuance Program may be accelerated upon
similar terms and conditions.
The Plan Administrator is also authorized to provide for the full and
immediate vesting of all outstanding options and unvested shares under the
Discretionary Option Grant and Stock Issuance Programs in connection
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with a change in control of the Company (whether by successful tender offer for
more than fifty percent (50%) of the outstanding voting stock or a change in the
majority of the Board by reason of one or more contested elections for Board
membership), with such vesting to occur either at the time of such change in
control or upon the subsequent termination of the individual's service, within a
designated period following such change in control.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
FINANCIAL ASSISTANCE. The Plan Administrator may institute a loan program
to assist one or more participants in financing the exercise of outstanding
options or the purchase of shares under the 1997 Plan. The terms of any such
assistance will be established in the sole discretion of the Plan Administrator.
However, all loans made under the 1997 Plan will be full-recourse and
interest-bearing, and the maximum credit available may not exceed the purchase
price payable for the acquired shares plus any withholding tax liability
incurred in connection with such acquisition.
CHANGES IN CAPITALIZATION. In the event any change is made to the
outstanding shares of Class A Common Stock by reason of any recapitalization,
stock dividend, stock split, combination of shares, exchange of shares or other
change in corporate structure effected without the Company's receipt of
consideration, appropriate adjustments will automatically be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
number and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances per calendar year, (iii) the number and/or class of securities for
which grants are subsequently to be made under the Automatic Option Grant
Program to new and continuing Board members and (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option. The adjustments to such outstanding options will preclude the dilution
or enlargement of the rights and benefits available under those options.
SPECIAL TAX ELECTION. The Plan Administrator may provide one or more
holders of options or unvested shares with the right to have the Company
withhold a portion of the shares otherwise issuable to such individuals in
satisfaction of the tax liability incurred by such individuals in connection
with the exercise of those options or the vesting of those shares.
Alternatively, the Plan Administrator may allow such individuals to deliver
previously acquired shares of Class A Common Stock in payment of such tax
liability.
AMENDMENT AND TERMINATION. The Board may amend or modify the 1997 Plan in
any or all respects whatsoever subject to any required stockholder approval. The
Board may terminate the 1997 Plan at any time, and the 1997 Plan will in all
events terminate upon the expiration of the ten year term measured from the
Effective Date.
OTHER EQUITY INCENTIVE PLAN
The Company also maintains the 1996 Stock Incentive Plan (the "1996 Plan"),
under which 879,000 shares of the Company's Class B Common Stock have been
reserved for issuance. As of July 31, 1997, options covering all 879,000 shares
were outstanding, no shares remained available for future grant, and no shares
of Class B Common Stock had been issued. On December 19, 1996, the following
executive officers were granted options to purchase shares of Class B Common
Stock under the 1996 Plan, at an exercise price of $5.00 per share, the fair
market value of the Class B Common Stock on the option grant date: Chester
Baffa, 50,000 shares; Kevin C. Daly, Ph.D., 250,000 shares; Todd Kreter, 50,000
shares; Steve Morihiro, 50,000 shares; James A. Pipp, 50,000 shares; and Mark
Spowart, 50,000 shares. The outstanding options have a term of ten years
measured from the option grant date, subject to earlier termination in the event
of the optionee's cessation of service with the Company. The outstanding options
generally become exercisable over the optionee's three year period of service
with the Company as follows: 25% of the option shares upon the optionee's
completion of one year of service measured from the option grant date, and the
balance of the option shares in a series of 24 equal monthly installments over
the optionee's continued period of service. The options are subject to
substantially the same acceleration provisions in effect under the new 1997
Plan, as
9
<PAGE> 11
described above under "General -- Acceleration." The Board does not intend to
grant any additional options under the 1996 Plan.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS. Options granted under the 1997 Plan may be either incentive
stock options which satisfy the requirements of Section 422 of the Internal
Revenue Code (the "Code") or nonstatutory options which are not intended to meet
such requirements. The federal income tax treatment for the two types of options
differs as follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. The optionee will, however, recognize
taxable income in the year in which the purchased shares are sold or
otherwise made the subject of a taxable disposition. For federal tax
purposes, dispositions are divided into two categories: (i) qualifying and
(ii) disqualifying. A qualifying disposition occurs if the sale or other
disposition is made after the optionee has held the shares for more than
two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied,
then a disqualifying disposition will result. If the optionee makes a
disqualifying disposition of the purchased shares, then the Company will be
entitled to an income tax deduction, for the taxable year in which such
disposition occurs, equal to the excess of (i) the fair market value of
such shares on the option exercise date over (ii) the exercise price paid
for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased
shares.
Nonstatutory Options. No taxable income is recognized by an optionee
upon the grant of a nonstatutory option. The optionee will in general
recognize ordinary income in the year in which the option is exercised
equal to the excess of the fair market value of the purchased shares on the
exercise date over the exercise price paid for the shares, and the optionee
will be required to satisfy the tax withholding requirements applicable to
such income. If the shares acquired upon exercise of the nonstatutory
option are unvested and subject to repurchase by the Company in the event
of the optionee's termination of service prior to vesting in those shares,
then the optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the excess of (i) the
fair market value of the shares on the date the repurchase right lapses
over (ii) the exercise price paid for the shares. The optionee may,
however, elect under Section 83(b) of the Code to include as ordinary
income in the year of exercise of the option an amount equal to the excess
of (i) the fair market value of the purchased shares on the exercise date
over (ii) the exercise price paid for such shares. If the Section 83(b)
election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses. The Company will be entitled to an
income tax deduction equal to the amount of ordinary income recognized by
the optionee with respect to the exercised nonstatutory option. The
deduction will generally be allowed for the taxable year of the Company in
which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to an income tax
deduction equal to such distribution for the taxable year in which the ordinary
income is recognized by the optionee.
DIRECT STOCK ISSUANCES. The tax principles applicable to direct stock
issuances under the 1997 Plan will be substantially the same as those summarized
above for the exercise of nonstatutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. The Company anticipates that any
compensation deemed paid by it in connection with disqualifying dispositions of
incentive stock option shares or exercises of nonstatutory options will qualify
as performance-based compensation for purposes of Section 162(m) of the Code and
will not have to be taken into account for purposes of the $1 million limitation
per covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Section 162(m) of the Code.
10
<PAGE> 12
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices at 100% of
fair market value will not result in any direct charge to the Company's
earnings. However, the fair value of those options is required to be disclosed
in the notes to the Company's financial statements, and the Company must also
disclose, in pro forma statements to the Company's financial statements, the
impact those options would have upon the Company's reported earnings were the
value of those options at the time of grant treated as compensation expense. In
addition, the number of outstanding options may be a factor in determining the
Company's earnings per share on a fully diluted basis.
NEW PLAN BENEFITS
As of July 31, 1997, no option grants or direct stock issuances had been
made under the 1997 Plan.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented by proxies, and entitled to vote at the 1997
Annual Meeting is required for approval of the 1997 Plan. If such approval is
obtained, the 1997 Plan will become effective on the date of the 1997 Annual
Meeting. In the absence of such approval, the 1997 Plan will not be implemented.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN AND THE RESERVATION OF 200,000 SHARES
THEREUNDER.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP served as the Company's
independent auditors for the fiscal year ended March 31, 1997. The Board of
Directors has selected that firm to continue in this capacity for the current
fiscal year. The Company is asking the stockholders to ratify the selection by
the Board of Directors of Ernst & Young LLP as the Company's independent
auditors to audit the financial statements of the Company for the fiscal year
ending March 31, 1998 and to perform other appropriate services. In the event
that the stockholders fail to ratify the appointment, the Board of Directors
will reconsider its selection. Even if the selection is ratified, the Board of
Directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors feels that such a change would be in the best interest of the Company
and its stockholders.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to respond to stockholders' questions, and that representative
will be given an opportunity to make a brief presentation to the stockholders if
he or she so desires.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding shares of the Company
present or represented and entitled to vote at the Annual Meeting will be
required for ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 1998.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION AND APPROVAL OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 1998.
11
<PAGE> 13
GENERAL
PRINCIPAL STOCKHOLDERS AND COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth, as of July 15, 1997, the number and
percentage ownership of the Company's Class A Common Stock by (i) all persons
known to the Company to beneficially own more than 5% of the outstanding Class A
Common Stock (based upon reports filed by such persons with the Commission),
(ii) each of the named executive officers in the Summary Compensation Table
which appears elsewhere herein, (iii) each director of the Company and director
nominee named under "Election of Directors," and (iv) all executive officers and
directors of the Company as a group. Except as otherwise indicated, each of the
persons named in this table has sole voting and investment power with respect to
the Class A Common Stock shown as beneficially owned, subject to community
property and similar laws, where applicable.
<TABLE>
<CAPTION>
AMOUNT OF CLASS A
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS(2)
------------------------------------------------ ------------------ -----------
<S> <C> <C>
Odetics, Inc.(1)................................ 8,005,000 82.9%
Gregory A. Miner................................ 6,100 *
Crandall Gudmundson............................. 500 *
Chester Baffa................................... 500 *
Kevin C. Daly, Ph.D............................. 500 *
Joel Slutzky.................................... -- *
Paul E. Wright.................................. -- *
All directors and executive officers as a group
(9 persons)................................... 7,600 *
</TABLE>
- ---------------
* Less than 1%.
(1) The address of Odetics is 1515 South Manchester Avenue, Anaheim, California
92802.
(2) Percentage ownership is based on 9,655,000 shares of Class A Common Stock
outstanding as of July 15, 1997.
12
<PAGE> 14
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The following table sets forth certain information regarding all executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- ----- -----------------------------------------------------
<S> <C> <C>
Kevin C. Daly, Ph.D.......... 53 Chairman of the Board, President and Chief Executive
Officer of the Company
Vice President and Chief Technical Officer of Odetics
Gregory A. Miner (1)......... 42 Chief Financial Officer of the Company
Vice President and Chief Financial Officer of Odetics
Chester Baffa................ 57 Vice President, Marketing and Sales of the Company
Todd Kreter.................. 37 Vice President, Operations of the Company
Steve Morihiro............... 38 Vice President, Engineering of the Company
James A. Pipp................ 52 Vice President, Controller and Secretary of the
Company
Mark Spowart................. 45 Vice President, Worldwide Sales of the Company
</TABLE>
- ---------------
(1) Mr. Miner is the Chief Financial Officer of Odetics and is serving as the
Chief Financial Officer of the Company on an interim basis pending the
Company's retention of a successor.
The following is a brief description of the capacities in which each of the
executive officers has served during the past five years. The biography of Dr.
Daly appears earlier in this Proxy Statement. See "Election of Directors."
Gregory A. Miner has served as Vice President of Finance and Chief
Financial Officer of the Company and Odetics since January 1994. Prior to
joining the Company, Mr. Miner served as Vice President, Chief Financial Officer
and a member of the Board of Directors of Laser Precision Corporation, a
manufacturer of telecommunications test equipment, from January 1984 until
December 1993. Mr. Miner is a certified public accountant.
Chester Baffa has served as Vice President, Marketing and Sales since June
1995. Prior to joining the Company, Mr. Baffa was Senior Vice President,
Marketing and Sales at Micropolis, Inc., a manufacturer of high capacity disk
and RAID storage products from May 1983 until September 1994. Prior to May 1983,
Mr. Baffa was Vice President, Marketing and Sales at Oki Data Corp.
Todd Kreter has served as the Company's Vice President, Operations since
June 1996 and as Director of Operations from January 1993 until June 1996. Mr.
Kreter served as a project manager at Odetics from 1990 until 1992. Mr. Kreter
was an engineer for Omutec, a division of Odetics which is engaged in production
of flight control hardware for commercial and military aircraft from 1986 until
1990. Prior to 1986, Mr. Kreter was a research and development engineer at Ford
Aerospace Corporation.
Steve Morihiro has served as the Company's Vice President, Engineering
since June 1996. Mr. Morihiro served as the Company's Director of Engineering
from December 1994 until June 1996, as Engineering Manager from October 1992
until December 1994 and as a Project Manager from January 1992 until October
1992. Mr. Morihiro served as a mechanical engineering manager at Odetics for the
Advanced Intelligent Machines division from October 1990 until October 1991 and
as operations manager from October 1991 until December 1991. Prior to joining
Odetics, Mr. Morihiro served from 1979 until 1982, and then again from 1983
until 1990, in various engineering and program management capacities at Western
Design Corporation, a developer and manufacturer of material handling equipment
for the defense industry.
James A. Pipp has served as the Vice President, Controller and Secretary of
the Company since June 1996 and as Controller since January 1993. From 1981 to
1993, Mr. Pipp served as the Corporate Controller of Odetics. Mr. Pipp is a
certified public accountant.
13
<PAGE> 15
Mark Spowart has served as Vice President, Worldwide Sales since June 1996
and has been responsible for the development and organization of the Company's
sales force since March 1992. Prior to joining the Company, Mr. Spowart served
in general sales management positions in various segments of the computer
industry including mainframe systems, Unix client servers and PC LAN. From April
1990 to March 1992, Mr. Spowart was District Manager for Auspex Systems, and
from March 1982 until April 1990, Mr. Spowart was employed by Memorex Telex in
general sales management positions.
Officers serve at the discretion of the Board of Directors.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company whose total cash salary and bonus for the
fiscal year ended 1997 exceeded $100,000 (the "Named Executive Officers"), for
each of the two fiscal years ended March 31, 1997 and 1996. No executive officer
who would have otherwise been includable in such table on the basis of salary
and bonus earned for fiscal 1997 resigned or terminated employment during that
year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
ANNUAL COMPENSATION NUMBER OF
------------------------ RESTRICTED SECURITIES ALL OTHER
FISCAL BONUS STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITIONS(1) YEAR SALARY($)(1) ($)(1) AWARDS($) OPTIONS(#) ($)(2)
- -------------------------------- ------ ------------ --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Daly 1997 $201,810 $ 60,000 $ --(3) 250,000(4) $4,106
Chief Executive Officer, 1996 164,104 50,000 2,465 12,000(5) 3,258
President and Chairman of the 10,000(5)(6)
Board
Gregory A. Miner, 1997 167,551 30,744 --(3) 35,000(5) 4,125
Chief Financial Officer 1996 141,642 38,800 2,567 12,000(5) 1,662
15,333(5)(6)
Chester Baffa, 1997 144,938 74,000 --(3) 50,000(4) --
Vice President, Marketing and 1996 100,067 36,668 1,914 -- --
Sales
Mark Spowart, 1997 106,384 192,979 --(3) 50,000(4) 4,021
Vice President, Worldwide 1996 90,312 173,739 2,567 -- 4,610
Sales
Steve Morihiro, 1997 99,000 15,000 --(3) 50,000(4) 3,120
Vice President, Engineering 1996 99,205 5,000 1,697 1,500(5) 2,976
667(5)(6)
</TABLE>
- ---------------
(1) Represents all amounts earned from Odetics and its subsidiaries on an
aggregate basis during the fiscal years shown, including amounts deferred
under Odetics' Executive Deferred Plan and 401(k) Plan. During fiscal 1996,
the salaries of Dr. Daly and Messrs. Baffa and Spowart were charged by
Odetics to the Company. Commencing in March 1997, the Company has paid fifty
percent of Mr. Miner's salary while Mr. Miner continues as Chief Financial
Officer.
(2) Represents Odetics's matching contribution to the respective accounts of the
Named Executive Officers under Odetics' 401(k) Plan.
(3) Odetics made a contribution of Class A Common Stock valued at approximately
$513,000 at the date of contribution to Odetics' Associate Stock Ownership
Plan (the "ASOP") during the fiscal year ended March 31, 1997. The amount of
the contribution made to the ASOP that is allocable to the named officer has
not yet been determined. The Company was charged $167,000 by Odetics
representing its share of this contribution. Amounts indicated for fiscal
1996 represent the Named Executive Officer's share of
14
<PAGE> 16
Odetics' contribution to the Odetics Associate Stock Ownership Plan during
fiscal 1996 based on the closing price of Odetics' Class A Common Stock at
March 31, 1996.
(4) Represents options to purchase shares of the Company's Class A Common Stock.
(5) Represents options to purchase shares of Odetics' Class A Common Stock.
(6) During fiscal 1996, Odetics offered all holders of Odetics' options that
were granted in fiscal 1994 the opportunity to have the option exercise
price of outstanding fiscal 1994 options reduced to the then current 1996
trading price. In connection with any such option repricing, one-third of
any repriced options were required to be cancelled. The option information
contained in this table does not take into account any options that may have
been cancelled in connection with any option repricing.
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1997
The following table sets forth information with respect to grants of stock
options during fiscal 1997 to each of the Named Executive Officers. No stock
appreciation rights were granted to any of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------ AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN OF BASE EXPIRATION ---------------------
NAME GRANTED(1)(2) FISCAL 1997 PRICE(3) DATE 5% 10%
- ------------------------------ ------------- -------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Daly, Ph.D........... 250,000 28.4% $ 5.00 12/18/07 $768,118 $1,992,178
Gregory A. Miner.............. -- -- -- -- -- --
Chester Baffa................. 50,000 5.7% $ 5.00 12/18/07 $157,224 $ 398,436
Mark Spowart.................. 50,000 5.7% $ 5.00 12/18/07 $157,224 $ 398,436
</TABLE>
- ---------------
(1) All of the options were granted to the Named Executive Officers on December
19, 1996 pursuant to the 1996 Plan and entitle the optionee to purchase
shares of the Company's Class B Common Stock. Such options have a maximum
term of ten years, subject to earlier termination in the event of the
optionee's cessation of service with the Company. Such options become
exercisable as follows: 25% of such options vest in December 1997 and the
remaining options vest in 24 equal monthly installments thereafter.
(2) Prior to the initial public offering of the Company, the Named Executive
Officers were entitled to participate in Odetics' 1994 Long-Term Stock
Incentive Plan. Amounts listed do not include options to purchase 35,000
shares of Class A Common Stock of Odetics granted to Mr. Miner during fiscal
1997. Such options vest in three equal annual installments commencing August
1997 and have an exercise price of $9.00 per share. Such options expire in
August 2007 and represent 19.1% of the options granted by Odetics in fiscal
1997. The 5% and 10% potential realizable value for such options is $198,102
and $502,029.
(3) The exercise price per share of the options granted represented the fair
market value of the underlying shares of Class B Common Stock on the date
the options were granted, as determined by the Board of Directors.
(4) The 5% and 10% assumed rates of appreciation are prescribed by the rules and
regulations of the Securities and Exchange Commission and do not represent
management's estimate or projection of future trading prices of the Common
Stock. Unless the market price of the Common Stock does in fact appreciate
over the option term, no value will be realized from the option grants.
15
<PAGE> 17
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase the Company's Class B Common Stock and Odetics'
Class A Common Stock during fiscal 1997 by each of the Named Executive Officers.
None of the outstanding options to purchase the Company's Class B Common Stock
were in-the-money as of March 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR ENDED OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT MARCH 31, 1997 AT MARCH 31, 1997(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(1) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Daly, Ph.D.
Class B Common................. -- -- -- 250,000 -- --
Odetics Class A Common......... 2,900 $ 39,875 27,400 8,000 $ 222,425 $ 71,000
Gregory A. Miner
Class B Common................. -- -- -- -- -- --
Odetics Class A Common......... 9,000 $ 128,250 10,333 43,000 $ 91,705 $ 215,375
Chester Baffa
Class B Common................. -- -- -- 50,000 -- --
Odetics Class A Common......... -- -- -- -- -- --
Mark Spowart
Class B Common................. -- -- -- 50,000 -- --
Odetics Class A Common......... -- -- -- -- -- --
Steve Morihiro
Class B Common................. -- -- -- 50,000 -- --
Odetics Class A Common......... 1,400 $ 18,725 3,767 1,000 $ 28,182 $ 8,875
</TABLE>
- ---------------
(1) Calculated based on the closing sales price of the Class A Common Stock of
Odetics on the date of exercise, less the applicable exercise price.
(2) Calculated based on the closing sales price of the Class A Common Stock of
Odetics at March 31, 1997 ($13 1/8) less the applicable exercise price.
ASSOCIATE BENEFITS PLANS
Odetics maintains a Profit Sharing Plan and Trust (the "Profit Sharing
Plan") which qualifies under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"). The Profit Sharing Plan provides that employees
("associates") of Odetics and the Company who meet a six month service
requirement automatically become participants. Each fiscal year, Odetics may, at
its discretion, make a contribution to the Profit Sharing Plan. Odetics may
contribute Class A Common Stock or cash to the Profit Sharing Plan. These
contributions are allocated to separate accounts of the participants in
proportion to their relative compensation, and are held in trust and invested.
Participant accounts are credited with investment gains and losses. Vesting
depends on the participant's years of service, with contributions being fully
vested after the participant has five years of service. When an associate leaves
Odetics or its subsidiaries, his account under the Profit Sharing Plan, if
vested, becomes distributable in a lump sum or over a period of time at the
discretion of the Profit Sharing Plan Administrator. Neither Odetics nor the
Company made any contributions to the Profit Sharing Plan for the fiscal years
ended March 31, 1997, 1996 and 1995.
The Profit Sharing Plan also includes the Odetics, Inc. 401(k) Plan. Under
the 401(k) Plan, associates with at least six months of service with Odetics or
its subsidiaries may elect to defer up to 15% of their annual compensation, not
to exceed the limits set by the Code. The maximum deferral for calendar year
1997 is $9,500.
The Company's associates who have been employed for six months by the
Company or its subsidiary are also eligible to participate in Odetics' Associate
Stock Ownership Plan, which qualifies under Section 401 of the Code. The ASOP
provides that associates who meet a six month service requirement automatically
16
<PAGE> 18
become participants. Each fiscal year, Odetics may, at its discretion, make a
contribution to the ASOP. Odetics may contribute Class A Common Stock of
Odetics, or the cash to buy Class A Common Stock. These contributions are
allocated to separate accounts of the participants in proportion to their
relative compensation, and are held in trust. Vesting depends on the
participant's years of service, with contributions being fully vested after the
participant has five years of service. When an associate leaves the Company or
Odetics, his account under the ASOP, if vested, is distributed in shares of
Class A Common Stock of Odetics. Odetics contributed Class A Common Stock valued
at approximately $513,000 to the ASOP for fiscal year 1997. The Company was
charged $167,000 by Odetics representing the Company's share of this
contribution.
Odetics also maintains an Executive Deferral Plan (the "Deferral Plan")
which is intended to provide deferred compensation benefits to designated
executives of Odetics and its subsidiaries who contribute to the growth and
success of Odetics and its subsidiaries. Eligible executives may elect to defer
up to 75%, but not less than $5,000, of their annual compensation. Participation
in the Deferral Plan is voluntary and may be discontinued at any time. Payment
of benefits commences upon the retirement, death, disability or termination of
employment of a participating executive.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL
ARRANGEMENTS
The Company does not currently have any employment contracts in effect with
any of its executive officers. The Company provides incentives such as salary,
benefits and option grants (which are typically subject to a three year vesting
schedule) to attract and retain executive officers and other key associates. The
Compensation Committee of the Board of Directors, as the Plan Administrator of
the 1996 Plan and the 1997 Plan, will have the authority to provide for the
accelerated vesting of the options and unvested shares granted under such plan,
in connection with the termination of an individual's employment or following an
acquisition or certain hostile changes in control of the Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Company can
indemnify its directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). The Company's Bylaws provide that the Company will
indemnify its directors and officers to the fullest extent permitted by law and
require the Company to advance litigation expenses upon receipt by the Company
of an undertaking by the director or officer to repay such advances if it is
ultimately determined that the director or officer is not entitled to
indemnification. The Bylaws further provide that rights conferred under such
Bylaws do not exclude any other right such persons may have or acquire under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
The Company's Certificate of Incorporation provides that, pursuant to
Delaware Law, its directors shall not be liable for monetary damages for breach
of the directors' fiduciary duty of care to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the duty
of care, and in appropriate circumstances equitable remedies such as injunctive
or other forms of nonmonetary relief will remain available under Delaware Law.
In addition, each director will continue to be subject to liability for breach
of the director's duty of loyalty to the Company or its stockholders, for acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Company has entered into agreements to indemnify its directors and
certain of its officers in addition to the indemnification provided for in the
Certificate of Incorporation and Bylaws. These agreements, among other things,
require the Company to indemnify its directors and certain of its officers for
certain expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by such person in any action or proceeding, including any
action by or in the right of the Company, on account of services as a director
or officer of the Company, or as a director or officer of any other company or
enterprise to which the person provides services at the request of the Company.
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<PAGE> 19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Gudmundson
and Slutzky and it is anticipated that Mr. Wright will be appointed to such
Committee following his election at the Annual Meeting. None of these
individuals was an officer or employee of the Company at any time during the
fiscal year ended March 31, 1997. Messrs. Slutzky and Gudmundson, directors of
the Company, are stockholders, executive officers and directors of Odetics. Mr.
Wright is also currently a director of Odetics and a member of its Compensation
and Stock Options Committee. No other interlocking relationship exists between
the Company's Board of Directors or Compensation Committee and the Board of
Directors of any other company.
Notwithstanding anything to the contrary, set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate by reference
previous or future filings, including this Proxy Statement, in whole or in part,
the following Compensation Committee Report and the Performance Graph on page
hereof are not soliciting material, are not deemed filed with the Commission and
shall not be incorporated by reference into any of such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors sets
the base salary of the Company's executive officers and approves individual
bonus programs for executive officers. The Committee will also be responsible
for administering the 1997 Plan, and accordingly will have discretion to make
option grants to the officers and establish the terms of each such grant under
the 1997 Plan. Since the Company did not complete its initial public offering
until March 1997, the Compensation Committee was not established until after the
fiscal year ended March 31, 1997. All compensation decisions during fiscal 1997
were made by the Board of Directors.
The following is a summary of policies which the Board of Directors
analyzed in determining the compensation for the officers of the Company. The
Committee intends to follow the same general policies in determining the
compensation for the officers of the Company in fiscal 1998, but may, in its
discretion, alter such policies to take into consideration the applicable
circumstances at the time.
COMPENSATION PHILOSOPHY
Under the supervision of the Board, the Company has developed a
compensation policy which is designed to:
(1) Attract and retain qualified senior executives who can play a
significant role in the achievement of the Company's goals;
(2) Reward executives for strategic management and the long-term
enhancement of stockholder value; and
(3) Create a performance-oriented environment that rewards performance with
respect to the financial and operations goals of the Company.
The Committee intends to apply a consistent philosophy to compensation for
all employees, including executive officers, which is based on the premise that
the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
customers and stockholders.
The guiding principle of the Committee is to establish a compensation
program that aligns executive compensation with the Company's objectives and
business strategies as well as with financial and operational performance.
Accordingly, each executive officer's compensation package is comprised of three
elements: (i) base salary which reflects individual performance and expertise
and is designed to be competitive with salary levels in effect at companies
within the industry which are of similar size; (ii) variable performance awards
payable in cash and tied to the Company's achievement of certain goals; and
(iii) long-term, stock
18
<PAGE> 20
based incentive awards which strengthen the mutuality of interests between the
executive officers and the Company's stockholders.
FACTORS
The principal factors which were considered in establishing the components
of each executive officer's compensation package for fiscal 1997 are summarized
below. In its discretion, the Committee may, however, apply different factors
for future years.
Base Salary. The Company establishes salaries for the Chief Executive
Officer and other officers on the basis of personal performance and by
considering the salaries of officers at comparably-sized companies according to
data obtained from executive compensation consultants and from other independent
outside sources, including the American Electronics Association annual survey of
executive compensation. The Committee has reviewed the base salaries of the
executive officers for fiscal 1997 and is of the opinion that such salaries are
not unreasonable in view of those paid by the Company's competitors and by other
companies of similar size.
Annual Incentive Compensation. Half of the annual bonus payable to the
Company's Chief Executive Officer is based on the achievement by the Company and
Odetics of certain corporate financial performance targets established for each
fiscal year. A significant portion of the bonuses payable to Messrs. Baffa and
Spowart consisted of commissions on sales of the Company's products. The
remaining bonuses payable to the executive officers are discretionary based upon
the individual officer's contribution to the Company during the fiscal year.
Long-Term Incentive Compensation. Each option grant is designed to align
the interests of the executive officers with those of the stockholders and to
provide each individual with a significant incentive to manage the Company from
the perspective of an owner with an equity stake in the business and to remain
in the service of the Company. The number of shares subject to each option grant
is based upon the officer's tenure, level of responsibility and relative
position with the Company. Due to the restrictions contained in the Internal
Revenue Service regulations governing the pending Distribution, the Company is
limited in the number of options which may be granted pending the Distribution
and immediately thereafter. In order to maximize the number of available
options, the Company established a new class of securities in fiscal 1997 with
lesser voting rights, the Class B Common Stock (one-twentieth of one vote per
share held). All executive officers, other than Dr. Daly, received the same
number of options. Dr. Daly was granted five times such amount in order to
provide a significant equity ownership to Dr. Daly comparable to that held by
chief executive officers of similar sized public companies. All of the options
granted in fiscal 1997 were subject to three year vesting schedules and were
granted at the fair market value of the Class B Common Stock at the time of the
grant of the options. Accordingly, the options will provide a return to the
executive officer only if he remains in the Company's employ, and then only if
the market price of the Company's Common Stock appreciates over the option term.
The Company also recently adopted the 1997 Plan which will enable the Company to
grant options to purchase a limited number of shares of Class A Common Stock.
The Committee reviewed the stock options awarded to the executive officers for
their services in fiscal year 1997 and is of the opinion that the option awards
are reasonable in view of the officers' individual performance and positions
with the Company.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code generally disallows a tax deduction to publicly held
corporations for compensation exceeding $1.0 million paid to certain of the
corporation's executive officers. The limitation applies only to compensation
which is not considered to be performance based. The nonperformance based
compensation to be paid to the Company's executive officers for fiscal year 1997
did not exceed the $1.0 million limit per officer, nor is it expected that the
nonperformance based compensation to be paid to the Company's executive officers
for fiscal 1998 will exceed that limit. The Company's 1996 Plan and 1997 Plan
are structured so that any compensation deemed paid to an executive officer in
connection with the exercise of option grants made under that plan will qualify
as performance based compensation which will not be subject to the $1.0 million
limitation. Because it is very unlikely that the cash compensation payable to
any of the Company's executive officers in the foreseeable future will approach
the $1.0 million limit, the Committee has decided at this time
19
<PAGE> 21
not to take any other action to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The Committee will
reconsider this decision should the individual compensation of any executive
officer ever approach the $1.0 million level.
It is the opinion of the Committee that the executive compensation policies
and plans provide the necessary total remuneration program to properly align the
Company's performance and the interests of the Company's stockholders through
the use of competitive and equitable executive compensation in a balanced and
reasonable manner, for both the short and long-term.
COMPENSATION COMMITTEE
Joel Slutzky
Crandall Gudmundson
20
<PAGE> 22
PERFORMANCE GRAPH FOR ATL PRODUCTS, INC.
COMPARISON OF CUMULATIVE RETURN
The following graph compares the cumulative total stockholder return on the
Company's Class A Common Stock, assuming an initial investment of $100, for the
period beginning March 7, 1997 (the effective date of the Company's initial
public offering) and ending March 31, 1997, with the cumulative total return of
the Nasdaq Computer Manufacturer Index and the Nasdaq Market Index for the same
period. This comparison assumes $100 was invested on March 7, 1997 in the
Company's Class A Common Stock and in each of such indices and assumes
reinvestment of dividends on a daily basis, although dividends have not been
declared on the Company's Class A Common Stock. The stockholder return is not
necessarily indicative of future performance.
<TABLE>
<CAPTION>
Nasdaq Com-
puter Manu-
Measurement Period ATL Class A Nasdaq Mar- facturer In
(Fiscal Year Covered) Common Stock ket Index dex
<S> <C> <C> <C>
3/07/97 100 100 100
3/31/97 78 93 91
</TABLE>
21
<PAGE> 23
CERTAIN TRANSACTIONS
Prior to the Company's initial public offering in March 1997 (the "IPO"),
the Company was a wholly owned subsidiary of Odetics. As the sole stockholder,
Odetics maintained substantial control over the operations of the Company and
provided the Company with significant management, financial, administrative and
other resources, including treasury, accounting, tax, internal audit, legal,
human resources, sales and marketing and other support services. The Company was
charged and/or allocated expenses of $1.6 million, $1.5 million and $1.6 million
for the years ended March 31, 1995, 1996 and 1997, respectively. The costs of
these services have been directly charged and/or allocated using methods that
the Company's management believes are reasonable. Such charges and allocations
are not necessarily indicative of the costs the Company would have incurred to
obtain these services had it been a separate entity. Neither Odetics nor the
Company has conducted any study or obtained any estimates from third parties to
determine what the cost of obtaining such services from third parties may have
been.
The Company paid approximately $6.7 million of the proceeds from the IPO to
Odetics to reduce the intercompany indebtedness. In addition, in April 1997, the
company entered into a four year promissory note payable to Odetics in the
original principal amount of approximately $13.0 million representing the
balance of the Company's intercompany borrowings from Odetics. This note is
payable in sixteen equal quarterly installments of principal plus accrued
interest commencing June 30, 1997 and bears interest at a rate equal to Odetics'
cost of borrowing (8.5% at March 31, 1997).
The Company and Odetics have entered into a number of agreements for the
purpose of defining their continuing relationship. These agreements were
negotiated in the context of a parent-subsidiary relationship and therefore are
not the result of negotiations between independent parties. It is the intention
of the Company and Odetics that such agreements and the transactions provided
for therein, taken as a whole, should accommodate the parties' interests in a
manner that is fair to both parties, while continuing certain mutually
beneficial joint arrangements. The parties intend that such agreements and
transactions provide fair market value to them on terms no less favorable to the
Company as would otherwise be available from unaffiliated parties. Because of
the complexity of the various relationships between the Company and Odetics,
however, there can be no assurance that each of such agreements, or the
transactions provided for therein, will be effected on terms at least as
favorable to the Company as could have been obtained from unaffiliated third
parties. While these agreements will provide the Company with certain benefits,
the Company is only entitled to the ongoing assistance of Odetics for a limited
time and the Company may not be able to continue to enjoy benefits from its
relationship with Odetics beyond the term of the agreements. The Company has
adopted a policy that all future agreements between the Company and Odetics will
be on terms that the Company believes are no less favorable to the Company than
the terms the Company believes would be available from unaffiliated parties.
There can be no assurance that upon termination of such assistance from Odetics
that the Company will be able to provide adequately such services internally or
obtain favorable arrangements from third parties to replace such services.
SEPARATION AND DISTRIBUTION AGREEMENT
The Separation and Distribution Agreement set forth the agreements between
the Company and Odetics with respect to the principal corporate transactions
required to effect the IPO, to separate the operations of the Company from
Odetics (the "Separation"), and to facilitate the distribution of all of
Odetics' shares of Class A Common Stock of the Company to the stockholders of
Odetics (the "Distribution"). Pursuant to this agreement, Odetics sold all
assets related to the business of the Company to the Company, and the Company
has assumed and agreed to faithfully perform and fulfill all related liabilities
and obligations. All assets conveyed have been transferred for a purchase price
equal to their respective book values, calculated in accordance with generally
accepted accounting principles, which the parties believe is equivalent to the
fair market value thereof. The Separation and Distribution Agreement also
provides that, subject to the terms and conditions thereof, Odetics and the
Company will take all reasonable steps necessary and appropriate to cause all
conditions to the Distribution to be satisfied and to effect the Distribution.
The Directors of Odetics will have the sole discretion to determine the date of
consummation of the Distribution, however, Odetics has
22
<PAGE> 24
agreed to consummate the Distribution as promptly as practicable following the
satisfaction or waiver of all the following conditions, but not later than
December 31, 1997:
(i) A private letter ruling from the IRS shall have been obtained, and
shall continue in effect, to the effect that, among other things, the
Distribution will qualify as a tax-free distribution for federal
income tax purposes under Section 355 of the Code, and such ruling
shall be in form and substance satisfactory to Odetics, in its sole
discretion;
(ii) Any material governmental approvals and consents necessary to
consummate the Distribution shall have been obtained and be in full
force and effect;
(iii) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Distribution shall be in effect,
and no other event outside the control of Odetics shall have occurred
or failed to occur that prevents the consummation of the
Distribution; and
(iv) No other events or developments shall have occurred that, in the
judgment of the Board of Directors of Odetics, would result in the
Distribution having a material adverse effect on Odetics or on its
stockholders.
The Separation and Distribution Agreement also provided for a full and
complete release and discharge after the IPO of all liabilities existing or
arising from all acts and events occurring or failing to occur or alleged to
have occurred or to have failed to occur and all conditions existing or alleged
to have existed on or before the IPO, between or among the Company and its
affiliates, on the one hand, and Odetics and its affiliates, on the other hand
(including any contractual agreements or arrangements existing or alleged to
exist between or among them on or before the IPO), except as expressly set forth
in the Separation and Distribution Agreement. Neither the Company nor Odetics is
aware of any such liabilities existing as of the date of this Proxy Statement.
The Company has agreed to indemnify, defend and hold Odetics and its
affiliates harmless from and against all liabilities relating to, arising out of
or resulting from (i) the failure of the Company or any other person to pay,
perform or otherwise promptly discharge any Company liabilities in accordance
with their respective terms, (ii) the Company's business, or any contract of the
Company, (iii) any breach by the Company or of the Separation and Distribution
Agreement or any ancillary agreements, and (iv) any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, with respect to all information contained in the
Company's Registration Statement on Form S-1 in connection with the IPO.
Odetics has agreed to indemnify, defend and hold the Company and its
affiliates from and against all liabilities relating to, arising out of or
resulting from (i) the failure of Odetics or any other person to pay, perform or
otherwise promptly discharge any liabilities of Odetics, (ii) the business of
Odetics or any contract of Odetics, and (iii) any breach by Odetics or any of
its affiliates of the Separation and Distribution Agreement or any ancillary
agreements. Neither the Company nor Odetics is aware of any liabilities existing
as of the date hereof which would give rise to an indemnification obligation
under the Separation and Distribution Agreement.
The Separation and Distribution Agreement also provides that during the
period prior to the Distribution, the Company will reimburse Odetics for its
proportionate share of premiums paid or accrued on insurance policies under
which the Company continues to have coverage.
SERVICES AGREEMENT
The Company and Odetics entered into an Administrative Services Agreement
(the "Services Agreement") in March 1997, pursuant to which Odetics agreed to
continue to provide limited services to the Company, including treasury,
accounting, tax, internal audit, legal and human resources functions. The
Company anticipates its aggregate costs under the Services Agreement for the
fiscal year ending March 31, 1998 will be approximately $500,000.
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<PAGE> 25
TAX ALLOCATION AGREEMENT
The Company and Odetics entered into a Tax Allocation Agreement pursuant to
which the Company agreed to make a payment to Odetics in an amount equal to the
taxes attributable to the operations of the Company on the consolidated federal
income tax returns and combined or consolidated state income or franchise tax
returns filed by Odetics for the period commencing on April 1, 1996 and ending
on the date on which the Company ceases to be a member of Odetics' consolidated
group. The Tax Allocation Agreement also requires Odetics to indemnify the
Company against any unpaid taxes due for periods prior to April 1, 1996. Neither
the Company nor Odetics is aware of any such unpaid taxes. In addition, the Tax
Allocation Agreement will provide that members of Odetics consolidated group
generating tax losses after April 1, 1996 will be paid by the other members
which utilize such losses to reduce such other members' tax liability. For the
year ended March 31, 1997, the Company paid to Odetics $1.6 million,
representing its obligation for fiscal 1997.
COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT
Under the federal securities laws, the Company's directors and officers and
any persons holding more than 10% of the Company's Common Stock are required to
report their ownership of the Company's Common Stock and any changes in that
ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established, and the Company is required to report in
this Proxy Statement any failure to file by these dates. During fiscal 1997, all
of these filing requirements were satisfied by its directors, officers and 10%
stockholders, except as follows: In March 1997, Chet Baffa purchased 500 shares
of the Company's Class A Common Stock in open-market transactions which he
failed to report on a Form 4 by April 10, 1997, the due date of such report. The
transaction was subsequently reported on a Form 4 filed by this officer in June
1997 when the oversight was brought to his attention by the Company's personnel
charged with assisting directors and officers with these filings.
In making these statements, the Company has relied upon a review of Forms
3, 4 and 5 and amendments thereto furnished to the Company during fiscal 1997
pursuant to Rule 16a-3 under the Securities Exchange Act.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Under the present rules of the Commission, the deadline for stockholders to
submit proposals to be considered for inclusion in the Company's Proxy Statement
for next year's Annual Meeting of Stockholders is on or about April 8, 1997.
Such proposals may be included in next year's Proxy Statement if they comply
with certain rules and regulations promulgated by the Commission. Stockholder
proposals must be mailed to the attention of the Company's Secretary at the
Company's principal executive offices located at 2801 Kelvin, Irvine, California
92614.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders, including the
Company's consolidated financial statements for the fiscal year ended March 31,
1997, accompanies the proxy materials being mailed to all stockholders. No
material contained in the Annual Report shall constitute proxy solicitation
materials.
24
<PAGE> 26
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting other than the matters set forth in
this Proxy Statement. Should any other matter requiring a vote of the
stockholders arise, it is intended that the proxy holders will vote on such
matters in accordance with their best judgment. Discretionary authority with
respect to such other matters is granted by execution of the enclosed proxy
card.
Irvine, California By Order of the Board of Directors,
August 5, 1997
JAMES A. PIPP
Secretary
25
<PAGE> 27
Appendix A
(For Edgar Filing Only)
ATL PRODUCTS, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the interests
of ATL Products, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Class A Common Stock,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Class A Common
Stock directly, either through the immediate purchase of such shares or as a
bonus for services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible
nonemployee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Class A Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
<PAGE> 28
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
E. Administration of the Automatic Option Grant Program shall be
self- executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under such program.
2.
<PAGE> 29
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) employees,
(ii) nonemployee members of the Board or the board
of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Nonstatutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as nonemployee Board members on the Plan Effective Date, (ii) those individuals
who first become nonemployee Board members on or after the Plan Effective Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as nonemployee
Board members at one or more Annual Stockholders Meetings held after the Plan
Effective Date.
3.
<PAGE> 30
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Class A Common Stock, including shares repurchased by
the Corporation on the open market. The maximum number of shares of Class A
Common Stock reserved for issuance over the term of the Plan shall not exceed
200,000 shares, subject to certain changes in the Corporation's capital
structure.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 50,000 shares of Class A Common Stock in the aggregate per calendar
year, beginning with the 1997 calendar year.
C. Shares of Class A Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire or terminate for any reason prior to exercise in full. Unvested
shares issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original exercise or direct issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Class A Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However,
shares subject to any options surrendered in connection with the stock
appreciation right provisions of the Plan shall not be available for reissuance.
Should the exercise price of an option under the Plan be paid with shares of
Class A Common Stock or should shares of Class A Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or the vesting of a
stock issuance under the Plan, then the number of shares of Class A Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the stock issuance,
and not by the net number of shares of Class A Common Stock issued to the holder
of such option or stock issuance.
D. If any change is made to the Class A Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Class A Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year,
(iii) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
nonemployee Board members, and (iv) the number and/or class of securities and
the exercise price per share in effect under each outstanding option under the
Plan. Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or
4.
<PAGE> 31
dilution of rights and benefits under such options. The adjustments determined
by the Plan Administrator shall be final, binding and conclusive.
5.
<PAGE> 32
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Class A Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Five
and the documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Class A Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
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B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution.
(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding to the extent the option is not otherwise at that
time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the expiration of the option term, and/or
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(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of
vested shares of Class A Common Stock for which such option is exercisable
at the time of the Optionee's cessation of Service but also with respect
to one or more additional installments in which the Optionee would have
vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Class A
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Nonstatutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Nonstatutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
8.
<PAGE> 35
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Class A Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Class A Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable
with respect to the total number of shares of Class A Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Class A Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, to be assumed by the successor corporation (or
parent thereof), (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing at the
time of the Corporate Transaction on any shares for which the option is not
otherwise at that time exercisable and provides for subsequent payout in
accordance with the same exercise/vesting schedule applicable to those option
shares or (iii) the acceleration of such option is subject to other limitations
imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically terminate,
and the shares of Class A Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the
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number and class of securities which would have been issuable to the Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction. Appropriate adjustments to
reflect such Corporate Transaction shall also be made to (i) the exercise price
payable per share under each outstanding option, provided the aggregate exercise
price payable for such securities shall remain the same, (ii) the maximum number
and/or class of securities available for issuance over the remaining term of the
Plan and (iii) the maximum number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances under the Plan per calendar year.
E. The Plan Administrator shall have the discretionary authority to
provide for the automatic acceleration of one or more outstanding options under
the Discretionary Option Grant Program upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed in the Corporate
Transaction, so that each such option shall, immediately prior to the effect
date of such Corporate Transaction, become fully exercisable with respect to the
total number of shares of Class A Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully vested
shares of Class A Common Stock. In addition, the Plan Administrator shall have
the discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Option Grant Program so that those
rights shall not be assignable in connection with such Corporate Transaction and
shall accordingly terminate upon the consummation of such Corporate Transaction,
and the shares subject to those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under the Discretionary Option Grant Program in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may provide that one or more of the Corporation's
outstanding repurchase rights with respect to shares held by the Optionee at the
time of such Involuntary Termination shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full.
G. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under the Discretionary Option Grant Program upon (i) a
Change in Control or (ii) the subsequent termination of the Optionee's Service
by reason of an Involuntary Termination within a designated period (not to
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<PAGE> 37
exceed eighteen (18) months) following the effective date of such Change in
Control. Each option so accelerated shall remain exercisable for fully vested
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of
Optionee's cessation of Service. In addition, the Plan Administrator shall have
discretionary authority to structure one or more of the Corporation's
outstanding repurchase rights so that those repurchase rights shall immediately
terminate with respect to any shares held by the Optionee at the time of such
Change in Control or Involuntary Termination, and the shares subject to those
terminated rights shall accordingly vest in full.
H. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program and to grant in substitution new options covering the same or
different number of shares of Class A Common Stock but with an exercise price
per share equal to the Fair Market Value per share of Class A Common Stock on
the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have the authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares Class A
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of (a)
the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the
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surrendered option (or surrendered portion) over (b) the aggregate
exercise price payable for those shares.
(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be made
in shares of Class A Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion) on the option
surrender date and may exercise such rights at any time prior to the later
of (a) five (5) business days after the receipt of the rejection notice or
(b) the last day on which the option is otherwise exercisable in
accordance with the terms of the documents evidencing such option, but in
no event may such rights be exercised more than ten (10) years after the
option grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Takeover, each individual
holding one or more options with such a limited stock appreciation right
shall have the unconditional right (exercisable for a thirty (30) day
period following such Hostile Takeover) to surrender each such option to
the Corporation, to the extent the option is at the time exercisable for
vested shares of Class A Common Stock. In return for the surrendered
option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Takeover Price of
the shares of Class A Common Stock which are at the time vested under each
surrendered option (or surrendered portion) over (B) the aggregate
exercise price payable for those shares. Such cash distribution shall be
paid within five (5) days following the option surrender date.
(iii) The Plan Administrator shall preapprove, at the time the
limited right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section
V. No additional approval of
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the Plan Administrator or the Board shall be required at the time of the
actual option surrender and cash distribution.
(iv) The balance of the option (if any) shall remain outstanding
and exercisable in accordance with the documents evidencing such option.
13.
<PAGE> 40
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Class A Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Class A Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five,
shares of Class A Common Stock may be issued under the Stock Issuance Program
for any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation,
or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Class A Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Class A Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Class A Common Stock by reason of any stock dividend, stock
split, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Class A Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject (i) the same
vesting requirements
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applicable to the Participant's unvested shares of Class A Common Stock and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Class A Common Stock issued to the Participant under
the Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Class A Common Stock issued under the
Stock Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Class A Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation, and
the Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Class A Common
Stock which would otherwise occur upon the cessation of the Participant's
Service or the nonattainment of the performance objectives applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or nonattainment of the applicable performance
objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Class A Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent (i)
those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued under the Stock
Issuance Program or any time while the Corporation's repurchase rights with
respect to those shares remain outstanding, to structure one or more of those
repurchase rights so that such rights
shall not be assignable in connection with a Corporate Transaction and shall
accordingly terminate upon the consummation
15.
<PAGE> 42
of such Corporate Transaction, and the shares subject to those terminated
repurchase rights shall thereupon vest in full.
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Class A Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding under the Stock Issuance Program, to structure one or more of those
repurchase rights so that such rights shall automatically terminate in whole or
in part, and the shares of Class A Common Stock subject to those terminated
rights shall immediately vest, upon (i) a Change in Control or (ii) the
subsequent termination of the Participant's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control or Involuntary
Termination.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates specified
below:
1. Each individual serving as a nonemployee Board member on the
Plan Effective Date shall automatically be granted at that time a Nonstatutory
Option to purchase 10,000 shares of Class A Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. Each individual who is first elected or appointed as a
nonemployee Board member on or after the Plan Effective Date shall automatically
be granted, on the date of such initial election or appointment, a Nonstatutory
Option to purchase 10,000 shares of Class A Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
3. On the date of each Annual Stockholders Meeting, beginning
with the 1998 Annual Stockholders Meeting, each individual who is to continue to
serve as an Eligible Director, whether or not that individual is standing for
re-election to the Board at that particular Annual Meeting, shall automatically
be granted a Nonstatutory Option to purchase 5,000 shares of Class A Common
Stock, provided such individual has served as a nonemployee Board member for at
least six (6) months. There shall be no limit on the number of such 5,000 share
option grants any one Eligible Director may receive over his or her period of
Board service, and nonemployee Board members who have previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall be eligible to
receive one or more such annual option grants over their period of continued
Board service.
Stockholder approval of the Plan on the Plan Effective Date will
constitute preapproval of each option granted pursuant to the express terms of
this Automatic Option Grant Program and the subsequent exercise of that option
in accordance with its terms.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Class A Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale
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<PAGE> 44
and remittance procedure specified thereunder is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 10,000 share grant shall vest,
and the Corporation's repurchase right shall lapse, in a series of four (4)
successive equal annual installments upon the Optionee's completion of each year
of Board service over the four (4) year period measured from the option grant
date. Each annual 5,000 share grant shall vest, and the Corporation's repurchase
right shall lapse, upon the Optionee's completion of one (1) year of Board
service measured from the automatic grant date.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution) shall have a twelve
(12) month period following the date of such cessation of Board service in
which to exercise each such option.
(ii) During the twelve (12) month exercise period, the option
may not be exercised in the aggregate for more than the number of vested
shares of Class A Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12) month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully vested shares of Class A Common Stock.
(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12)
month exercise period or (if earlier) upon the expiration of the option
term, the option
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shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service for any reason
other than death or Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-
OVER
A. The shares of Class A Common Stock subject to each option
outstanding under this Article Four at the time of a Corporate Transaction but
not otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Class A Common Stock at the
time subject to such option and may be exercised for all or any portion of those
shares as fully vested shares of Class A Common Stock. Immediately following the
consummation of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
B. The shares of Class A Common Stock subject to each option
outstanding under this Article Four at the time of a Change in Control but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Class A Common Stock at the time
subject to such option and may be exercised for all or any portion of those
shares as fully vested shares of Class A Common Stock. Each such option shall
remain exercisable for such fully vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. All outstanding repurchase rights under the Automatic Option Grant
Program shall automatically terminate, and the unvested shares of Class A Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30) day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Class A Common Stock at the
time subject to each surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid within five
(5) days following the surrender of the option to the Corporation. Stockholder
approval of the Plan on the Plan Effective Date shall constitute preapproval of
the grant of each such option surrender right under this Automatic Option Grant
Program and the subsequent exercise of such right in accordance with the terms
and
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provisions of this Section II.D. No additional approval or consent of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
those shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Class A Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Nonstatutory Options or unvested shares of Class A Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic Option Grant Program) with the right to use shares of Class A Common
Stock in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the following
formats:
Stock Withholding: The election to have the Corporation
withhold, from the shares of Class A Common Stock otherwise issuable upon the
exercise of such Nonstatutory Option or the vesting of such shares, a portion of
those shares with an aggregate Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at
the time the Nonstatutory Option is exercised or the shares vest, one or more
shares of Class A Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
21.
<PAGE> 48
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on July 25, 1997 and shall
become effective upon approval by the Corporation's stockholders at the 1997
Annual Meeting held on the Plan Effective Date.
B. The Plan shall terminate upon the earliest to occur of (i)
September 4, 2007, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such plan termination, all outstanding option grants and
unvested stock issuances shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing those grants or
issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Class A Common Stock may be granted
under the Discretionary Option Grant Program and shares of Class A Common Stock
may be issued under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs shall be held in
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Class A Common Stock available for issuance
under the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Class A Common Stock under the Plan shall be used for general corporate
purposes.
22.
<PAGE> 49
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Class A Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Class A Common Stock issued pursuant
to it.
B. No shares of Class A Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Class A Common Stock issuable under the Plan, and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Class A Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
23.
<PAGE> 50
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. CLASS A COMMON STOCK shall mean the Corporation's Class A Common Stock,
which shall be registered under Section 12(g) of the 1934 Act and shall be
entitled to one (1) vote per share on all matters subject to stockholder
approval.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
A-1.
<PAGE> 51
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean ATL Products, Inc., a Delaware corporation, and
its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. ELIGIBLE DIRECTOR shall mean a nonemployee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Class A Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Class A Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be deemed equal
to the closing selling price per share of Class A Common Stock on the date
in question, as such price is reported on the Nasdaq National Market or
any successor system. If there is no closing selling price for the Class A
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Class A Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Class A Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Class A Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange. If there is no
closing selling price for the Class
A-2.
<PAGE> 52
A Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his
or her duties and responsibilities or the level of management to which he
or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and participation in any corporate
performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment
by more than fifty (50) miles, provided and only if such change, reduction
or relocation is effected by the Corporation without the individual's
consent.
P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
A-3.
<PAGE> 53
R. NONSTATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PARTICIPANT shall mean any person who is issued shares of Class A
Common Stock under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
nonemployee Board member to perform his or her usual duties as a Board member by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
W. PLAN shall mean the Corporation's 1997 Stock Incentive Plan, as set
forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean September 4, 1997, the date of the 1997
Annual Stockholders Meeting at which the Plan is approved by the Corporation's
stockholders.
Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more
nonemployee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders.
A-4.
<PAGE> 54
AA. SECONDARY COMMITTEE shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
BB. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short swing profit liabilities of Section 16 of the
1934 Act.
CC. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
nonemployee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
DD. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
EE. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Class A
Common Stock under the Stock Issuance Program.
FF. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
GG. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Class A Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Class A Common Stock paid by the tender offeror in effecting
such Hostile Take-Over. However, if the surrendered option is an Incentive
Option, the Take-Over Price shall not exceed the clause (i) price per share.
II. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Nonstatutory Options or unvested
shares of Class A Common Stock in connection with the exercise of those options
or the vesting of those shares.
JJ. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-5.
<PAGE> 55
A-6.
<PAGE> 56
PROXY
ATL PRODUCTS, INC.
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Class A Common Stock of ATL PRODUCTS, INC.
(the "Company") hereby appoints KEVIN C. DALY, Ph.D and JAMES A. PIPP, and each
of them, proxies of the undersigned, each with full power to act without the
other and with power of substitution, to represent the undersigned at the Annual
Meeting of the Stockholders of the Company to be held at 2801 Kelvin Avenue,
Irvine, California on September 4, 1997 at 10:00 a.m. (Pacific Daylight Time),
and at any adjournments thereof, and to vote all shares of Class A Common Stock
of the Company held of record by the undersigned on July 31, 1997, with all the
powers the undersigned would possess if personally present, in accordance with
the instructions on the reverse hereof.
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting of Stockholders and hereby ratifies and confirms all that said proxies,
and each of them, may lawfully do by virtue hereof. The undersigned also
acknowledges receipt of the Notice of Annual Meeting of Stockholders to be held
September 4, 1997, the Proxy Statement and Annual Report to Stockholders for the
year ended March 31, 1997 furnished herewith.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE> 57
[X] Please mark votes as in this example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS BELOW, OR IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3, AND AS THE NAMED PROXIES CONSIDER ADVISABLE IN
THEIR JUDGMENT WITH REGARD TO ANY OTHER MATTERS PROPERLY BROUGHT TO A VOTE AT
THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
1. Election of Directors
Nominees standing for election by holders of Class A Common Stock:
Kevin C. Daly, Ph.D., Crandall Gudmundson, Joel Slutzky and Paul E.
Wright.
FOR [_] WITHHELD [_]
[_] For all nominees except as noted above.
2. Approval of the 1997 Stock Incentive Plan and the reservation of
200,000 shares of Class A Common Stock for issuance thereunder.
FOR [_] AGAINST [_] ABSTAIN [_]
3. Ratification of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending March 31, 1998.
FOR [_] AGAINST [_] ABSTAIN [_]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
(This Proxy must be signed exactly as your name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the
stockholder is a corporation, a duly authorized officer should sign on behalf of
the corporation and should indicate his or her title.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature: Date:
--------------------------- -----------------------------
Signature: Date:
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