<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 ss.240.14a-11(c) or ss.240.14a-12
Pivot Rules, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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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
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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<PAGE>
PIVOT RULES, INC.
42 WEST 39TH STREET
NEW YORK, NEW YORK 10018
----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 28, 1998
----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Pivot Rules, Inc. (the "Corporation") will be held at 5:00 P.M., local time, on
October 28, 1998, at the Corporation's headquarters, 42 West 39th Street, 9th
Floor, New York, New York 10018, for the following purposes:
1. To elect five directors of the Corporation to hold office until the
next Annual Meeting of Shareholders;
2. To ratify the Pivot Rules, Inc. 1997 Stock Option Plan (the "Plan"),
as amended including the increase in the number of shares of the
Corporation's common stock issuable under the Plan in the aggregate
from 200,000 shares to 500,000 shares and certain other amendments
described in the accompanying Proxy Statement;
3. To approve an amendment to the Corporation's Restated Certificate of
Incorporation to change the name of the Corporation from "Pivot Rules,
Inc." to "Bluefly, Inc.";
4. To ratify the appointment of M.R.Weiser&Co.LLP as the independent
auditors for the Corporation for the year ending December 31, 1998;
and
5. To transact such other business as may properly come before the
meeting.
Only holders of record of the Corporation's common stock at the close
of business on September 10, 1998 are entitled to notice of, and to vote at,
the meeting and any adjournment thereof. Such Shareholders may vote in person
or by proxy.
SHAREHOLDERS WHO FIND IT CONVENIENT ARE CORDIALLY INVITED TO ATTEND
THE MEETING IN PERSON. IF YOU ARE NOT ABLE TO DO SO AND WISH THAT YOUR STOCK BE
VOTED, YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
E. KENNETH SEIFF
President and Chief Executive Officer
October 2, 1998
<PAGE>
PIVOT RULES, INC.
42 WEST 39TH STREET
NEW YORK, NEW YORK 10018
----------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Pivot Rules, Inc., a New York corporation (the
"Corporation"), of proxies to be used at the Annual Meeting of Shareholders of
the Corporation to be held at 5:00 P.M., local time, on October 28, 1998, at
the Corporation's headquarters, 42 West 39th Street, 9th Floor, New York, New
York 10018, and at any adjournment thereof. The purposes of the meeting are:
1. To elect five directors of the Corporation to hold office until the
next Annual Meeting of Shareholders;
2. To ratify the Pivot Rules, Inc. 1997 Stock Option Plan (the "Plan"),
as amended including the increase in the number of shares of the
Corporation's common stock, par value $.01 per share (the "Common
Stock"), issuable under the Plan in the aggregate from 200,000 shares
to 500,000 shares and certain other amendments described herein;
3. To approve an amendment to the Corporation's Restated Certificate of
Incorporation to change the name of the Corporation from "Pivot Rules,
Inc." to "Bluefly, Inc;";
4. To ratify the appointment of M.R.Weiser&Co.LLP as the independent
auditors for the Corporation for the year ending December 31, 1998;
and
5. To transact such other business as may properly come before the
meeting.
If proxy cards in the accompanying form are properly executed and
returned, the shares of Common Stock represented thereby will be voted as
instructed on the proxy. If no instructions are given, such shares will be
voted (i) for the election as directors of the nominees for the Board of
Directors named below; (ii) in favor of the proposal to ratify the Plan, as
amended; (iii) in favor of the proposal to approve the amendment to the
Corporation's Restated Certificate of Incorporation; (iv) in favor of the
proposal to ratify the appointment of M.R.Weiser&Co.LLP as the independent
auditors for the Corporation and (v) in the discretion of the Proxies named in
the proxy card on any other proposals to properly come before the meeting or
any adjournment thereof. Any proxy may be revoked by a shareholder prior to its
exercise upon written notice to the Chief Executive Officer of the Corporation,
or by the vote of a shareholder cast in person at the meeting. The approximate
date of mailing of this Proxy Statement and accompanying form of proxy is
October 2, 1998.
VOTING
Holders of record of Common Stock on September 10, 1998 will be
entitled to vote at the Annual Meeting or any adjournment thereof. A majority
of outstanding shares as of the record date will constitute a quorum for the
transaction of business. As of September 30, 1998, there were 2,717,788 shares
of Common Stock outstanding and entitled to vote. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Each share of Common Stock entitles the
holder thereof to one vote on all matters to come before the Annual Meeting.
The favorable vote of a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
necessary to elect the nominees for directors of the Corporation, the favorable
vote of a majority of the votes of the shares of Common Stock present in person
or represented by proxy at the Annual Meeting is necessary to ratify the Plan,
as amended, and to ratify the selection of M.R.Weiser&Co.LLP and the favorable
vote of a majority of all outstanding shares entitled to vote at the Annual
Meeting is necessary to approve the
<PAGE>
amendment to the Corporation's Restated Certificate of Incorporation.
Abstentions are counted as a vote against the proposals being considered,
except for the election of directors as to which they will have no effect.
Broker non-votes will have no effect on the outcome of the proposals set forth
above. However, broker non-votes will have the same legal effect as a vote
against the proposed ratification of the Plan, as amended, and the proposed
amendment to the Corporation's Restated Certificate of Incorporation. The Board
of Directors recommends a vote FOR each of the proposals set forth above.
ITEM 1. ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting. The Board of
Directors has recommended the persons named in the table below as nominees for
election as directors. With the exception of Ms. Popenoe, all such persons are
presently directors of the Corporation. Unless otherwise specified in the
accompanying proxy, the shares voted pursuant to it will be voted for the
persons named below as nominees for election as directors. If, for any reason,
at the time of the election any of the nominees should be unable or unwilling
to accept election, it is intended that such proxy will be voted for the
election, in such nominee's place, of a substitute nominee recommended by the
Board of Directors. However, the Board of Directors has no reason to believe
that any nominee will be unable or unwilling to serve as a director.
The following information is supplied with respect to the nominees for
election as directors of the Corporation:
NOMINEES FOR DIRECTOR
DIRECTOR OF THE
NAME OF DIRECTOR AGE CORPORATION SINCE
- ---------------- --- -----------------
E. Kenneth Seiff 33 1991 to present
Red Burns 73 1998 to present
Martin Miller 68 1991 to present
Cris Popenoe 50
Robert G. Stevens 45 1996 to present
E. KENNETH SEIFF, the founder of the Corporation, has served as the
Corporation's Chairman of the Board, Chief Executive Officer and Treasurer
since its inception in April 1991. He became President of the Corporation in
October 1996.
GOLDIE BURNS (AKA RED BURNS) has served as a director of the
Corporation since August 1998. She has been a faculty member of New York
University since September 1983 where she is currently Chairman and Professor
of the Interactive Telecommunications Program and has been named the Tokyo
Broadcasting System Chair. Professor Burns is recognized as a leader in the
communications industry and has been named a member of Governor Pataki's Task
Force on New Media and the Internet. Professor Burns has received numerous
prestigious honors and awards, including the Crain's New York Business
All-Stars Award in Education, the Mayor of New York's Award for Excellence in
Science and Technology, and the Matrix Award for New Media. Professor Burns has
written over seven publications in the area of communications.
MARTIN MILLER has served as a director of the Corporation since July
1991. Since October 1997, Mr. Miller has been a partner in the Belvedere Fund,
L.P., a fund of hedge funds. From September 1986 to October 1997, Mr. Miller
was President and a director of Baxter International, Inc. ("Baxter"), a New
York based apparel wholesaler. From January 1990 to April 1996, Mr. Miller was
Chairman of Ocean Apparel, Inc., a Florida based sportswear firm.
CRIS POPENOE has served as Managing Director, Internet Commerce, of
Nicholson NY, an interactive agency, since January 1998. From November 1996 to
December 1997, Ms. Popenoe was Managing Associate of the Media &
Telecommunications Group at PricewaterhouseCoopers LLP. From December 1995 to
October 1996, Ms. Popenoe was
2
<PAGE>
President of Ki Interactive, an internet media and entertainment consulting
company. From July 1992 to November 1995, Ms. Popenoe was President of Putnam
New Media, an interactive media publisher.
ROBERT G. STEVENS has served as a director of the Corporation since
December 1996. Since December 1994, Mr. Stevens has been a Vice President of
Mercer Management Consulting, Inc. ("Mercer"), a management consulting firm.
From November 1992 to December 1994, Mr. Stevens was a Principal at Mercer.
MEETINGS OF THE BOARD
During the fiscal year ended December 31, 1997, the Board of Directors
met, or acted by unanimous written consent, on six (6) occasions. Each of the
directors attended 75% or more of the aggregate number of meetings of the Board
of Directors and committee(s) on which he served during the 1997 fiscal year.
The Board of Directors has established an Audit Committee ("Audit
Committee") comprised of Robert G. Stevens and Martin Miller. The Audit
Committee is responsible for recommending to the Board of Directors the
appointment of the Corporation's outside auditors, examining the results of
audits, reviewing internal accounting controls and reviewing related party
transactions. The Audit Committee did not hold any meetings or act by unanimous
written consent during the Corporation's last fiscal year, but met on three
occasions subsequent to the fiscal year-end in respect of the year-end
financial statements.
The Board of Directors has also established an Option
Plan/Compensation Committee ("Option Plan/Compensation Committee") consisting
of Robert G. Stevens and Martin Miller. Mr. Stevens serves as chairman of this
committee. The Option Plan/Compensation Committee administers the Plan,
establishes the compensation levels for executive officers and key personnel
and oversees the Corporation's bonus plans. The Option Plan/Compensation
Committee met, or acted by unanimous written consent, on two (2) occasions
during the Corporation's last fiscal year.
The Board of Directors has no standing nominating committee.
3
<PAGE>
SHARE OWNERSHIP
The following table and notes set forth certain information regarding
the beneficial ownership of the Common Stock as of September 30, 1998 by all
person(s) known by the Corporation to be the beneficial owner of more than 5%
of the Common Stock, by each director and nominee for director of the
Corporation, by each of the Named Executives (as defined herein) and by all
directors and executive officers of the Corporation as a group. Except as
otherwise indicated, the Corporation believes that each beneficial owner has
the sole power to vote, as applicable, and to dispose of all shares of Common
Stock owned by such beneficial owner.
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED COMMON STOCK(1)
- ---- ------------------ ---------------
E. Kenneth Seiff(2).................. 505,157(3) 18.59%
Red Burns............................ -- *
Martin Miller........................ 5,000(4) *
Robert G. Stevens.................... 19,939(4)(5) *
Mark Patricof........................ -- *
Cris Popenoe......................... -- *
Joseph Boughton, Jr.(6).............. 207,548(7) 7.64%
All directors and executive
officers as a group (8 persons).... 546,459(8) 20.11%
- -------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally
includes voting or investment power with respect to securities. Shares
of Common Stock issuable upon the exercise of options or warrants
currently exercisable or exercisable within 60 days are deemed
outstanding for computing the percentage ownership of the person
holding such options or warrants but are not deemed outstanding for
computing the percentage ownership of any other person.
(2) Mr. Seiff's address is c/o Pivot Rules, Inc., 42 West 39th Street, New
York, New York 10018.
(3) Includes 3,000 shares of Common Stock issuable under outstanding stock
options granted under the Plan exercisable by Nicole Seiff, a
consultant to the Corporation and the wife of E. Kenneth Seiff, as to
which Mr. Seiff disclaims beneficial ownership.
(4) Includes 5,000 shares of Common Stock issuable under outstanding stock
options granted under the Plan.
(5) Includes 1,000 shares of Common Stock issuable under outstanding
warrants.
(6) Mr. Boughton's address is c/o Middlemarket Capital Management Co.,
2627 Sandy Plains Road, Suite 201, Marietta, Georgia 30066.
(7) Includes 70,000 shares of Common Stock issuable under outstanding
warrants held by Northstar Investment Group, Ltd. ("Northstar"). Mr.
Boughton is the President of Northstar.
(8) Includes 27,000 shares of Common Stock issuable under outstanding
stock options and warrants.
4
<PAGE>
EXECUTIVE OFFICERS OF THE CORPORATION
The following table sets forth the names, ages and all positions and
offices with the Corporation held by the Corporation's present executive
officers.
NAME AGE POSITIONS AND OFFICES PRESENTLY HELD
- ---- --- ------------------------------------
E. Kenneth Seiff......... 33 Chairman of the Board, Chief Executive
Officer, President and Treasurer
Patrick C. Barry......... 35 Executive Vice President of Operations and
Chief Financial Officer
Jonathan B. Morris....... 30 Executive Vice President and Secretary
- ----------------
Following is information with respect to the Corporation's executive
officers who are not also directors of the Corporation:
PATRICK C. BARRY has served as Executive Vice President of Operations
of the Corporation since July 1998 and as Chief Financial Officer of the
Corporation since August 1998. From June 1996 until July 1998, Mr. Barry served
as Chief Financial Officer and Vice President of Operations at Audible, Inc.,
an Internet content delivery company. From March 1995 to June 1996, Mr. Barry
was the Chief Financial Officer of Warner Music Enterprises, Inc., a direct
response company. From July 1993 until March 1995, Mr. Barry served as
Controller of Book-of-the-Month Club, Inc., a direct response company.
JONATHAN B. MORRIS has served as Executive Vice President and
Secretary of the Corporation since June 1998. From November 1995 until June
1998, Mr. Morris was an attorney at Brown Raysman Millstein Felder & Steiner,
LLP, a law firm. From September 1993 until November 1995, Mr. Morris was an
attorney at Mudge Rose Guthrie Alexander & Ferndon, a law firm.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to the Chief
Executive Officer of the Corporation for the Corporation's fiscal years ended
December 31, 1997 and December 31, 1996 (each person appearing in the table is
referred to as a "Named Executive"). No other executive officer of the
Corporation received a total compensation from the Corporation in excess of
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ------------------------- -----------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS($) (#)(1) ($) ($)
- ------------------- ---- ------ ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Kenneth Seiff.... 1997 164,461 -- 1,235 -- 25,000 -- --
Chairman of the 1996 89,115 144,759 -- -- -- -- --
Board, Chief
Executive
Officer,
President and
Treasurer
</TABLE>
- ---------
(1) Options granted at an exercise price equal to the fair market value on
the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the Plan to the Named Executives during the fiscal year ended
December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR (%) PRICE ($) DATE
- -------------------- ------------------------ ------------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
E. Kenneth Seiff -- n/a n/a n/a
</TABLE>
In February 1998, the Board of Directors awarded Mr. Seiff options
exercisable for 25,000 shares of Common Stock exercisable at the fair market
value on the date of grant. Such grant was payable as a bonus for the 1997
fiscal year.
The Corporation does not currently grant stock appreciation rights.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during the last fiscal year and
the unexercised options held at December 31, 1997. None of the Named Executives
exercised any outstanding options during the fiscal year ended December 31,
1997.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
DECEMBER 31, 1997 (#) AT DECEMBER 31, 1997 ($)
- -------------------- ----------------------------------------------------- ---------------------------------------------
NAME EXERCISABLE UNEXERCISEABLE EXERCISABLE UNEXERCISEABLE
- -------------------- ------------------------ ------------------------ ------------------ ---------------------
<S> <C> <C> <C> <C>
E. Kenneth Seiff n/a n/a n/a n/a
</TABLE>
EMPLOYMENT AGREEMENTS
The Corporation has an employment contract, which was amended on May
21, 1997, with E. Kenneth Seiff, its Chief Executive Officer. The amended
employment agreement, which expires on January 1, 2000, provides for a base
salary of $165,000 subject to increase by the Board of Directors, and an annual
bonus to be determined by the Board of Directors but not to exceed Mr. Seiff's
annual salary for the year in question. At the discretion of the Board of
Directors, all or part of such bonus may be paid through the issuance to Mr.
Seiff of capital stock of the Corporation or stock options issued pursuant to
the Plan, provided that at the request of Mr. Seiff a portion of such bonus
sufficient to pay any income taxes arising from such bonus will be paid in cash
rather than in capital stock of the Corporation. In addition, the Corporation
maintains a $1.2 million key person life insurance policy on the life of Mr.
Seiff. In 1998, options exercisable for 25,000 shares of Common Stock were
awarded to Mr. Seiff as a bonus for his services to the Corporation in 1997.
DIRECTORS' COMPENSATION
The Corporation's directors do not receive any cash compensation for
their services as members of the Board of Directors, although they are
reimbursed for expenses incurred on behalf of the Corporation.
Each non-employee director who was a member of the Board of Directors
on the closing of the Corporation's initial public offering was granted on such
date an option to purchase 5,000 shares of Common Stock and each person who
subsequently becomes a non-employee director will be automatically granted an
option to purchase 5,000 shares on the date such person becomes a non-employee
director. In addition, each non-employee director who is a member of the Board
of Directors on April 30 of a year will be automatically granted an option to
purchase 2,500 shares of Common Stock on May 1 of the following year. All
options issued to non-employee directors will have an exercise price equal to
at least the fair market value of the shares of Common Stock on the date of
grant and have a term of 10 years.
ITEM 2. RATIFICATION OF THE 1997 STOCK OPTION PLAN, AS AMENDED
On March 5, 1997, the Board of Directors of the Corporation adopted,
and the shareholders approved the Pivot Rules, Inc. 1997 Stock Option Plan. The
Plan currently provides for the issuance of options (each an "Option") to
purchase up to 200,000 shares of Common Stock. Of this total, 162,500 shares
are issuable pursuant to either Incentive Stock Options ("ISOs") qualifying
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or Non-Qualified Stock Options ("NQSOs"), granted to officers, key
employees and, in the case of NQSOs, consultants (currently 4 consultants) of
the Corporation, and 37,500 shares are issuable pursuant to NQSOs granted to
non-employee directors of the Corporation (currently 4 directors). The Plan is
designed to provide an incentive to officers, key employees, consultants and
non-employee directors of the Corporation by making available to them an
opportunity to acquire a proprietary interest or to increase their proprietary
interest in the growth and performance of the Corporation.
7
<PAGE>
As of July 31, 1998, Options to purchase 214,600 shares of Common Stock had
been granted and remain outstanding under the Plan to officers, key employees
and consultants (of which Options to purchase 52,100 shares had been granted to
officers of the Corporation subject to approval of the shareholders of the
Corporation of an increase in the number of shares of Common Stock available
for grant under the Plan as may be necessary for the issuance of such Options)
and Options to purchase 22,500 shares of Common Stock had been granted and
remain outstanding to non-employee directors. As of July 31, 1998, no shares
remain available for future grant to officers, key employees and consultants,
and 15,000 shares remained available for future grant to non-employee
directors.
Proposed Amendments
The Board of Directors of the Corporation believes that certain
amendments to the Plan would assist the Corporation in attracting, motivating
and retaining experienced officers, employees, consultants and directors.
Accordingly, on June 25, 1998, the Board of Directors approved an amendment to
the Plan, subject to shareholder ratification, which would increase the
aggregate number of shares of Common Stock issuable under the Plan from 200,000
shares to 500,000 shares. In addition, on July 30, 1998, the Board of Directors
approved amendments to the Plan, subject to shareholder ratification, which
would (i) eliminate the sublimits on the maximum aggregate numbers of shares
which may be issued to officers, key employees and consultants, and to
non-employee directors, respectively, (ii) allow the grant of Options generally
to non-employee directors under the Plan (in addition to Options which may
otherwise be available for automatic grant under the Plan), (iii) change the
period for the exercise of Options in the case of officers and key employees
whose employment is terminated by reason of retirement or mental or physical
disability to (a) in the case of ISOs, three months following the date of such
retirement or one year following the date of such mental or physical
disability, and in the case of NQSOs, three months following the date of such
retirement or mental or physical disability or in the discretion of the Option
Plan/Compensation Committee up to one year following the date of such
retirement or mental or physical disability, and (iv) change the period for the
exercise of Options in the case of non-employee directors whose services are
terminated by reason of retirement or mental or physical disability to three
months following the date of such retirement or mental or physical disability
or in the discretion of the Option Plan/Compensation Committee up to one year
following the date of such retirement or mental or physical disability.
The Board of Directors recommended that the Plan, as amended be
presented to the Corporation's shareholders for ratification. The Board of
Directors adopted the amendments relating to an increase in the number of
shares of Common Stock issuable under the Plan and the elimination of the
sublimits on the maximum aggregate numbers of shares which may be issued to
officers, key employees, consultants and non-employee directors to ensure that
the Plan has sufficient shares reserved to allow for future grants under the
Plan and to provide flexibility to the Corporation in allocating such grants to
the recipients under the Plan. The amendment to permit option grants to
non-employee directors (in addition to the automatic grant) was adopted to
attract, motivate and retain experienced directors. The amendments relating to
the exercise period of Options following retirement or mental or physical
disability were adopted to provide the Option Plan/Compensation Committee with
the discretion to allow additional time for exercise of Options following
retirement or mental or physical disability.
Should shareholders fail to ratify the Plan, as amended, the
Corporation would likely be severely constrained in its ability to attract and
retain executives, other key employees, consultants and directors, and in
motivating and retaining skilled management personnel and directors necessary
for the Corporation's success. In addition, if the Plan, as amended is not
ratified, Options exercisable for an aggregate of 52,100 shares of Common Stock
granted to the Corporation's officers in fiscal year 1998, which are subject to
shareholder approval, would become void and the Corporation's officers would be
entitled to the cash equivalent of such Options, which the Corporation agreed
to negotiate with such officers in good faith.
The following is a summary of the material provisions of the Plan.
Such summary should, however, be read in conjunction with, and is qualified in
its entirety by reference to, the complete text of the Plan, as proposed to be
amended, as set forth in Appendix A to this Proxy Statement.
8
<PAGE>
Administration of the Plan. The Option Plan/Compensation Committee of
the Board of Directors administers the Plan. The Option Plan/Compensation
Committee has the full power and authority, subject to the provisions of the
Plan, to designate participants, grant Options and determine the terms of all
Options, except that non-employee directors are, in addition to discretionary
grants, automatically granted Options on an annual basis pursuant to the
formula described below. In addition, the Plan currently provides that no
participant may be granted NQSOs to purchase more than 100,000 shares of Common
Stock in any one fiscal year. The Option Plan/Compensation Committee is
required to make adjustments with respect to Options granted under the Plan in
order to prevent dilution or expansion of the rights of any holder. The Plan
requires that the Option Plan/Compensation Committee be composed of at least
two directors each of whom is an "outside director" as that term is defined for
purposes of Section 162(m) of the Code. The Plan also requires that the Option
Plan/Compensation Committee members be "Non-Employee Directors" within the
meaning of Rule 16b-3 promulgated under the Exchange Act. Each member of the
Option Plan/Compensation Committee is a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Exchange Act and an "outside director" as that
term is defined for purposes of Section 162(m) of the Code.
Amendment. The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the Board
of Directors of the Corporation, but no amendment without the approval of the
shareholders of the Corporation shall be made if shareholder approval would be
required under Section 162(m) of the Code, Section 422 of the Code, Rule 16b-3
under the Exchange Act or any other law or rule of any governmental authority,
stock exchange or other self-regulatory organization to which the Corporation
is subject. Neither the amendment, suspension or termination of the Plan shall,
without the consent of the holder of such Option, alter or impair any rights or
obligations under any Option theretofore granted.
Options Issued Under Stock Option Plan. The terms of specific Options
are determined by the Option Plan/Compensation Committee. The per share
exercise price of the Common Stock subject to an ISO shall not be less than
100% of the fair market value of the shares of Common Stock on the date of
grant. However, in the case of an ISO granted to a holder of shares
representing more than 10% of the total combined voting power of the
Corporation (a "10% Shareholder"), the per share exercise price shall not be
less than 110% of the fair market value of the Common Stock on the date of the
grant. The per share exercise price of the Common Stock subject to a NQSO will
be the price determined by the Option Plan/Compensation Committee. The term of
each NQSO will be specified by the Option Plan/Compensation Committee, which
will generally not exceed 10 years from the date of grant. However, the term of
ISOs must not exceed 10 years after the date of the grant (five years, if
granted to a 10% Shareholder). In addition, the fair market value of shares of
Common Stock subject to ISOs (determined as of the date such ISOs are granted)
exercisable for the first time by any individual during any calendar year may
in no event exceed $100,000.
Upon the exercise of an Option, the Option holder shall pay the
Corporation the exercise price plus the amount of the required federal and
state withholding taxes, if any. At the Option Plan/Compensation Committee's
discretion, the Plan allows the participant to pay the exercise price (i) in
cash, shares of Common Stock, outstanding Options or other consideration or any
combination thereof or (ii) pursuant to a broker-assisted cashless exercise
program, provided in each case that such methods avoid "short-swing" trading
profits to the participant under Section 16(b) of the Exchange Act. The Plan
also allows participants to elect to have shares withheld upon exercise for the
payment of withholding taxes.
The unexercised portion of any Option granted to an officer or key
employee under the Plan will generally be terminated (a) thirty (30) days after
the date on which the optionee's employment is terminated for any reason other
than (i) Cause (as defined in the Plan), (ii) retirement or mental or physical
disability, or (iii) death; (b) immediately upon the termination of the
optionee's employment for Cause; (c) three months after the date on which the
optionee's employment is terminated by reason of retirement or mental or
physical disability; or (d)(i) 12 months after the date on which the optionee's
employment is terminated by reason of the death of the optionee, or (ii) three
months after the date on which the optionee shall die if such death shall occur
during the three-month period following the termination of the optionee's
employment by reason of retirement or mental or physical disability. This
provision was amended, subject to shareholder ratification, as discussed above.
Generally, any Option granted under the Plan which is forfeited, expires or
terminates prior to vesting or exercise will again be available for award under
the Plan.
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Under the Plan, an Option generally may not be transferred by the
optionee other than by will or by the laws of descent and distribution. During
the lifetime of an optionee, an Option may be exercised only by the optionee
or, in certain instances, by the optionee's guardian or legal representative,
if any.
Directors' Options. The Plan provides that each non-employee director,
who has not previously received a grant of NQSOs will automatically be granted
a NQSO to purchase 5,000 shares of Common Stock on the date of appointment or
election, subject to the provisions of the Plan. The Plan further provides that
each non-employee director who is serving on the Board on April 30 of a year
during the term of the Plan beginning in calendar year 1998 will automatically
receive a NQSO to purchase 2,500 shares of Common Stock on May 1 of the
following year. The exercise price of the shares of Common Stock subject to
Options granted to each non-employee director shall be 100% of the fair market
value of the shares of Common Stock on the date of grant. Options granted to
non-employee directors may only be exercised within ten years of the date of
grant. Options granted to non-employee directors terminate (i) thirty (30) days
after termination of the director's service as a director of the Corporation
for any reason other than mental or physical disability or death, (ii) three
months after the date the director ceases to serve as a director of the
Corporation due to physical or mental disability or (iii) (A) 12 months after
the date the director ceases to serve as a director due to the death of the
director or (B) three months after the death of the director if such death
shall occur during the three month period following the date the director
ceased to serve as a director of the Corporation due to physical or mental
disability. This provision was amended, subject to shareholder ratification, as
discussed above. Except as discussed herein, Options granted to non-employee
directors are on the same terms and conditions as all other Options granted
pursuant to the Plan.
As of September 30, 1998, the following individuals and groups had
been granted Options under the Plan in the amounts indicated: E. Kenneth Seiff
(Chairman of the Board, Chief Executive Officer, President and Treasurer):
25,000 shares; Patrick C. Barry (Executive Vice President of Operations and
Chief Financial Officer): 55,100 shares; Jonathan B. Morris (Executive Vice
President and Secretary): 55,000 shares; Martin Miller (Director): 5,000
shares; Robert G. Stevens (Director): 5,000 shares; Mark Patricof (Director):
5,000 shares; Red Burns (Director): 5,000 shares; all current executive
officers as a group: 153,100 shares; all current non-executive officer
directors as a group: 20,000 shares; and all employees, including all current
officers, who are not executive officers, as a group: 41,000 shares. As of
September 30, 1998, the market value of the Common Stock underlying outstanding
Options was approximately $750,000.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Each of Messrs. Barry and Morris has a direct interest in the
ratification of the Plan, as amended, to increase the aggregate number of
shares of Common Stock issuable under the Plan from 200,000 shares to 500,000
shares, thereby increasing the number of shares of Common Stock available for
issuance to officers, key employees, consultants and non-employee directors
under the Plan, by reason of a portion of their Options under the Plan being
subject to the ratification of the Plan, as amended by the Corporation's
shareholders. Fred Rosenfeld, a former director of the Corporation who retired
as a director, has an interest in the ratification of the Plan insofar as he
received a one time grant of Options exercisable for 2,500 shares of Common
Stock on July 30, 1998 at an exercise price of $5.00 per share and was provided
with one year following the date of his retirement to exercise such option, in
each case subject to shareholder ratification.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a description of the federal income tax
consequences under the Code, of the grant and exercise of the benefits awarded
under the Plan.
There will be no federal income tax consequences to employees,
directors, consultants or the Corporation on the grant of a NQSO. On the
exercise of a NQSO, the employee, consultant or director generally will have
taxable ordinary income, subject, in the case of an employee, to withholding,
in an amount equal to the excess of the fair market value of the shares of
Common Stock received on the exercise date over the option price of the shares.
The Corporation
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will be entitled to a tax deduction in an amount equal to such excess, provided
the Corporation complies with applicable reporting and/or withholding rules.
Any ordinary income realized by an employee, consultant or director upon
exercise of a NQSO will increase his tax basis in the Common Stock thereby
acquired. Upon the sale of Common Stock acquired by exercise of a NQSO,
employees, consultants and directors will realize capital gain or loss, which
capital gain may be subject to reduced rates of tax depending upon the holding
period for such stock.
An employee, consultant or director who surrenders shares of Common
Stock in payment of the exercise price of a NQSO will not recognize gain or
loss on his surrender of such shares, but will recognize ordinary income on the
exercise of the NQSO as described above. Of the shares received in such an
exchange, that number of shares equal to the number of shares surrendered will
have the same tax basis and capital gains holding period as the shares
surrendered. The balance of the shares received will have a tax basis equal to
their fair market value on the date of exercise, and the capital gains holding
period will begin on the date of exercise.
With respect to ISOs, no compensation income is recognized by a
participant, and no deduction is available to the Corporation upon either the
grant or exercise of an ISO. However, the difference between the exercise price
of an ISO and the market price of the Common Stock acquired on the exercise
date will be included in alternative minimum taxable income of a participant
for the purposes of the "alternative minimum tax." Generally, if an optionee
holds the shares acquired upon exercise of ISOs until the later of (i) two
years from the grant of the ISOs or (ii) one year from the date of acquisition
of the shares upon exercise of an ISO, any gain recognized by the participant
on a sale of such shares will be treated as capital gain. The gain recognized
upon the sale is the difference between the Option price and the sale price of
the Common Stock. The net federal income tax effect on the holder of ISOs is to
defer, other than for alternative minimum tax purposes, until the shares are
sold, taxation of any increase in the value of the Common Stock from the time
of grant to the time of exercise. If the optionee sells the shares prior to the
expiration of the holding period set forth above, the optionee will realize
ordinary compensation income in the amount equal to the difference between the
exercise price and the fair market value on the date of exercise. The
compensation income will be added to the optionee's basis for purposes of
determining the gain on the sale of the shares. Such gain will be capital gain
if the shares are held as capital assets. If the application of the
above-described rule would result in a loss to the optionee, the compensation
income required to be recognized thereby would be limited to the excess, if
any, of the amount realized on the sale over the basis of the shares sold. If
an optionee disposes of shares obtained upon exercise of an ISO prior to the
expiration of the holding period described above, the Corporation will be
entitled to a deduction in the amount of the compensation income that the
optionee recognizes as a result of the disposition, subject to the Corporation
satisfying its withholding and/or reporting obligations.
If an optionee is permitted to, and does, make the required payment of
the Option price by delivering shares of Common Stock, the optionee generally
will not recognize any gain as a result of such delivery, but the amount of
gain, if any, which is not so recognized will be excluded from his basis in the
new shares received. However, the use by an optionee of shares previously
acquired pursuant to the exercise of an ISO to exercise an Option will be
treated as a taxable disposition if the transferred shares have not been held
by the optionee for the requisite holding period described above.
If the Corporation delivers cash, in lieu of fractional shares, or
shares of Common Stock to an employee pursuant to a cashless exercise program,
the employee will recognize ordinary income equal to the cash paid and the fair
market value of any shares issued as of the date of exercise. An amount equal
to any such ordinary income will be deductible by the Corporation, provided it
complies with applicable reporting and/or withholding requirements.
If an optionee is permitted to, and does, exercise an ISO later than
three months (one year in the event of the optionee's disability, as defined in
Code Section 22(e)(3)) of the optionee's termination of employment (other than
by reason of death), the optionee will recognize income, and the Corporation
generally will be entitled to a deduction, upon exercise of the Option in
accordance with the rules for NQSOs, described above provided it complies with
applicable reporting and/or withholding requirements.
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Section 162(m) of the Code, which generally disallows a tax deduction
for compensation over $1,000,000 paid to the Chief Executive Officer and
certain other highly compensated employees ("covered employees") of publicly
held corporations, provides that "performance-based" compensation will not be
subject to the $1,000,000 deduction limitation. Since an employer is not,
except in the case of a disqualifying disposition, entitled to a deduction upon
the grant or exercise of an ISO in any event, this provision generally does not
affect the Corporation's tax treatment with regard to ISOs. The compensation
element of NQSOs granted by "outside directors" under a plan approved by
shareholders with an exercise price equal to the fair market value of the
underlying stock as of the date of grant is considered performance-based
compensation, if certain requirements are met. The Plan meets such requirements
and, accordingly, the compensation element of NQSOs issued with an exercise
price at least equal to the fair market value of the underlying Common Stock on
the date of grant will not be subject to the deduction limitation of Section
162(m). However, the compensation element of NQSOs issued with an exercise
price below the fair market value of the Common Stock on the date of grant to
individuals who are covered employees at the end of the year of the exercise of
such NQSOs will be subject to the deduction limitation of Code Section 162(m).
In addition, it is anticipated that the compensation element of those NQSOs
granted to officers subject to shareholder approval also will not qualify as
performance-based compensation because such officers are entitled to a cash
payment in the event that the Plan is not ratified by the Corporation's
shareholders.
The Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974 and is not required to be qualified under Section
401(a) of the Code.
The Board of Directors recommends a vote FOR ratification of the Plan,
as amended.
ITEM 3. APPROVAL OF AMENDMENT TO
THE RESTATED CERTIFICATE OF INCORPORATION
On July 30, 1998, the Board of Directors of the Corporation
unanimously adopted a resolution that would amend the Corporation's Restated
Certificate of Incorporation to change the Corporation's name to Bluefly, Inc.
(the "Amendment"), subject to approval of the shareholders.
In June 1998, the Corporation announced the discontinuance of its golf
sportswear division. On September 8, 1998, the Corporation launched
Bluefly.com, a Web site that offers men's, women's and children's name brand
apparel and accessories at significant discounts as well as provides
information on current trends and other fashion related content. As a result,
the Corporation desires to establish a name that is more appropriate for its
Internet business.
If approved by the shareholders at the Annual Meeting, the new name
will become effective upon the filing of an amendment to the Corporation's
Restated Certificate of Incorporation with the Department of State of the State
of New York. The change of corporate name will be accomplished by amending
Article First of the Corporation's Restated Certificate of Incorporation to
read as follows:
"First: The name of the corporation is Bluefly, Inc."
The change in corporate name will not affect the validity or
transferability of stock certificates presently outstanding, and the
Corporation's shareholders will not be required to exchange stock certificates
to reflect the new name. Shareholders should keep the certificates they now
hold, which will continue to be valid, and should not send them to the
Corporation or its transfer agent.
If the Amendment is approved, the Corporation's trading symbols "PVTR"
and "PVTRW" on the Nasdaq SmallCap Market will be changed to "BFLY" and
"BFLYW," respectively, and the Corporation's trading symbols "PVR" and "PVRW"
on the Boston Stock Exchange will be changed to "BFL" and "BFLW," respectively.
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The affirmative vote of the holders of a majority of all outstanding
Common Stock entitled to vote on the matter, in person or by proxy, at the
Annual Meeting is required for approval of the Amendment.
The Board of Directors recommends a vote FOR the proposal to amend the
Corporation's Restated Certificate of Incorporation to change the Corporation's
name to Bluefly, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1992, the Corporation and Joseph J. Boughton, Jr., an
approximately 16% shareholder in the Corporation, entered into a loan agreement
pursuant to which Mr. Boughton loaned the Corporation $100,000. Under the terms
of such loan agreement, Mr. Boughton received preemptive rights such that he
would have the opportunity to maintain at least an 8% equity interest in the
Corporation. In November 1996, the Corporation and Mr. Boughton entered into a
letter agreement pursuant to which, in return for the right to subscribe to
approximately 11.5% of the notes and warrants issued by the Corporation in
connection with the Corporation's bridge financing in January 1997, Mr.
Boughton agreed that his contractual preemptive rights terminated upon the
closing of the Corporation's initial public offering. Pursuant to the terms of
such letter agreement, Northstar, an entity controlled by Mr. Boughton,
purchased 1.75 of the 15 units sold in the bridge financing upon the same terms
and conditions as the other investors in the bridge financing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's directors
and executive officers and persons who beneficially own more than ten percent
of the Common Stock (collectively, the "Reporting Persons") to file with the
Commission initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Common Stock. Reporting Persons are required to
furnish the Corporation with copies of all such reports. To the Corporation's
knowledge, based solely on a review of copies of such reports furnished to the
Corporation and certain representations of the Reporting Persons, the
Corporation believes that during the 1997 fiscal year all Reporting Persons
complied with all applicable Section 16(a) reporting requirements, except as
set forth in the following sentences. Meena N. Bhatia filed one late report
covering the acquisition of 500 shares of Common Stock and 500 shares of
Warrants in May 1997. William T. McLoone filed one late report covering the
acquisition of 300 shares of Common Stock and 300 shares of Warrants in May
1997. Robert G. Stevens filed one late report covering the acquisition of 1,000
shares of Common Stock and 1,000 shares of Warrants in May 1997. David Lewis
filed one late report covering the acquisition of 1,000 shares of Common Stock
and 1,000 shares of Warrants in May 1997.
ITEM 4. SELECTION OF AUDITORS
The Board of Directors has selected M.R.Weiser&Co.LLP as independent
auditors for the fiscal year ending December 31, 1998, and has further directed
that management submit the selection of auditors for ratification by the
shareholders at the Annual Meeting. The Corporation's financial statements for
the 1997 fiscal year were examined and reported upon by M.R.Weiser&Co.LLP.
In the event that the shareholders do not approve of
M.R.Weiser&Co.LLP, the Board of Directors is not obligated to appoint other
auditors, but the Board of Directors will give consideration to such
unfavorable vote. 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 determines such a
change would be in the best interest of the Corporation and its shareholders.
A representative of M.R.Weiser&Co.LLP will be present at the meeting,
will be provided the opportunity to make a statement if he or she desires to do
so, and will be available to respond to appropriate questions from
shareholders.
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Effective January 1998, M.R.Weiser&Co.LLP was engaged as the
Corporation's independent auditors, replacing Grant Thornton LLP, the
Corporation's former auditors. The Corporation's Audit Committee of the Board
of Directors approved the appointment of M.R.Weiser&Co.LLP. There were no
disagreements with the former auditors on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
with respect to the Corporation's financial statements for the fiscal year
ended December 31, 1996 or up through the time of replacement, which, if not
resolved to the former auditor's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report for the year ended December 31, 1996. The report of Grant Thornton LLP
in connection with such audit did not contain any adverse opinion or disclaimer
of opinion, and was not modified as to uncertainty, audit scope or accounting
principles. Before retaining M.R.Weiser&Co.LLP, the Corporation had not
consulted with M.R.Weiser&Co.LLP regarding accounting principles.
The Board of Directors recommends a vote FOR the ratification of
M.R.Weiser&Co.LLP as the Corporation's independent auditors.
OTHER BUSINESS
The Board of Directors of the Corporation currently knows of no other
matters to be presented at the Annual Meeting. However, if any other matters
properly come before the meeting, or any adjournment thereof, it is intended
that proxies in the accompanying form will be voted in accordance with the
judgment of the persons named therein.
SHAREHOLDER PROPOSALS
Subject to compliance with the Corporation's Amended and Restated
By-laws, as amended, as described below, proposals of shareholders intended to
be presented at the next annual meeting of the Corporation's Shareholders must
be received by the Corporation for inclusion in the Corporation's 1999 Proxy
Statement and form of proxy on or prior to a reasonable time before the
Corporation begins to print and mail its proxy materials for the Corporation's
1999 Annual Meeting in accordance with Rule 14a-8(e) promulgated under the
Exchange Act. Notice of proposals of shareholders submitted outside of the
process of Rule 14a-8 is considered untimely if such notice is not received by
the Corporation within a reasonable time before it mails its 1999 Proxy
Statement and form of proxy.
The Corporation's Amended and Restated By-laws, as amended, provides
that a shareholder who intends to present a proposal for shareholder vote at
the Corporation's 1999 Annual Meeting must give written notice to the Secretary
of the Corporation not less than 90 days nor more than 120 days prior to the
date that is one year from the date of the Corporation's 1998 Annual Meeting.
Accordingly, any such proposal must be received by the Corporation between May
28, 1999 and June 28, 1999. The notice must contain specified information about
the proposed business and the shareholder making the proposal.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or
will be borne by the Corporation. Directors, officers and employees of the
Corporation may solicit proxies personally or by telephone or other means of
communications. Although there is no formal agreement to do so, arrangements
may be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals, and the
Corporation may reimburse them for any attendant expenses.
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It is important that your shares be represented at the meeting. If you
are unable to be present in person, you are respectfully requested to sign the
enclosed proxy and return it in the enclosed stamped and addressed envelope as
promptly as possible.
By Order of the Board of Directors,
E. KENNETH SEIFF
President
Dated: October 2, 1998
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APPENDIX A
PIVOT RULES, INC.
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purposes of this Pivot Rules, Inc. 1997 Stock Option Plan (the "Plan")
are to encourage selected employees, consultants and directors of Pivot Rules,
Inc. (together with any successor thereto, the "Company' ) and its Affiliates
(as defined below) to acquire a proprietary interest in the growth and
performance of the Company, to generate an increased incentive to contribute to
the Company's future success and prosperity, thus enhancing the value of the
Company for the benefit of its shareholders, and to enhance the ability of the
Company and its Affiliates to attract and retain qualified individuals upon
whom, in large measure, the sustained progress, growth, and profitability of
the Company depend.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by, controls or is under common control with
the Company.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" shall mean a committee of the Board designated by the
Board to administer the Plan and composed of not less than two directors, each
of whom is both a non-employee director within the meaning of Rule 16b- 3 and
an "outside director" as that term is defined for purposes of Section 162(m) of
the Code.
(e) "Consultant" shall mean any Person who contracts to provide services
to the Company as an independent contractor.
(f) "Fair Market Value" shall mean, with respect to Shares or other
securities (i) the closing price per Share of the Shares on the principal
exchange on which the Shares are then trading, if any, on such date, or, if the
Shares were not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if the Shares are not traded on an
exchange but are quoted on NASDAQ or a successor quotation system, (1) the last
sales price (if the Shares are then listed as a National Market Issue under the
NASDAQ National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Shares on such
date as reported by NASDAQ or such successor quotation system; or (iii) if the
Shares are not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the Shares on such date as determined in good faith by the Committee; or
(iv) if the provisions of clauses (i), (ii) and (iii) shall not be applicable,
the fair market value established by the Committee acting in good faith.
(g) "Incentive Stock Option" shall mean an option granted under Section 6
of the Plan that meets the requirements of Section 422 of the Code or any
successor provision thereto.
(h) "Key Employee" shall mean any officer, director or other employee who
is a regular full-time employee of the Company or its present and future
Affiliates.
(i) "Non-Employee Director" shall mean each member of the Board who is not
an employee of the Company or any Affiliate.
(j) "Non-Qualified Stock Option" shall mean an option granted under the
Plan that is not an Incentive Stock Option.
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(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(1) "Option Agreement" shall mean a written agreement, contract, or other
instrument or document evidencing an Option granted under the Plan.
(m) "Participant" shall mean a Key Employee, Consultant or Non-Employee
Director who has been granted an Option under the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation thereto.
(p) "Shares" shall mean the common stock of the Company, $.01 par value,
and such other securities or property as may become the subject of Options
pursuant to an adjustment made under Section 4(b) of the Plan.
(q) "Ten Percent Shareholder" shall mean a Person, who together with his
or her spouse, children and trusts and custodial accounts for their benefit,
immediately at the time of the grant of an Option and assuming its immediate
exercise, would beneficially own, within the meaning of Section 424(d) of the
Code, Shares possessing more than ten percent (10%) of the total combined
voting power of all of the outstanding capital stock of the Company.
SECTION 3. ADMINISTRATION
(a) Generally. The Plan shall be administered by the Committee. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Option shall be within the sole discretion of the Committee, may be made at any
time, and shall be final, conclusive, and binding upon all Persons, including
the Company, any Affiliate, any Participant, any holder or beneficiary of any
Option, any shareholder of the Company or any Affiliate, and any employee of
the Company or of any Affiliate.
(b) Powers. Subject to the terms of the Plan and applicable law and except
as provided in Section 7 hereof, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Options to be granted to each Participant under the Plan; (iii) determine the
number of Shares to be covered by Options; (iv) determine the terms and
conditions of any Option; (v) determine whether, to what extent, and under what
circumstances Options may be settled or exercised in cash, Shares, other
Options, or other property, or canceled, forfeited, or suspended, and the
method or methods by which Options may be settled, exercised, canceled,
forfeited, or suspended; (vi) interpret and administer the Plan and any
instruments or agreements relating to, or Options granted under, the Plan;
(vii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (viii) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan.
(c) Reliance, Indemnification. The Committee may employ attorneys,
consultants, accountants or other persons and the Committee, the Company and
its officers and directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons. No member of the Committee shall be
personally liable for any action, determination or interpretation taken or made
in good faith with respect to the Plan, or Options granted thereunder and all
members of the Committee shall be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.
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SECTION 4. SHARES AVAILABLE FOR OPTIONS
(a) Shares Available. Subject to adjustment as provided in Section 4(b):
(i) Limitation on Number of Shares. Options issuable under the Plan
are limited such that the maximum aggregate number of Shares which may
issued to Key Employees, Consultants and Non-Employee Directors pursuant
to, or by reason of, Options is 500,000. No Participant shall be granted
in any one fiscal year Options to purchase more than 100,000 Shares. To
the extent that an Option granted to (A) a Key Employee or Consultant or
(B) a Non-Employee Director ceases to remain outstanding by reason of
termination of rights granted thereunder, forfeiture or otherwise, the
Shares subject to such Option shall again become available for award under
the Plan to (x) Key Employees and Consultants and (y) Non-Employee
Directors, respectively; provided, however, that in the case of the
cancellation or termination of an Option in the same fiscal year that such
Option was granted, both the cancelled Option and the newly granted Option
shall be counted in determining whether the recipient has received the
maximum number of such Options under the Plan for such fiscal year.
(ii) Accounting for Awards. For purposes of this Section 4, the number
of Shares covered by an Option to (A) a Key Employee or Consultant or (B)
a Non-Employee Director shall be counted on the date of grant of such
Option against the aggregate number of Shares available for granting
Options under the Plan to (x) Key Employees and Consultants or (y)
Non-Employee Directors, respectively.
(iii) Sources of Shares Deliverable Under Options. Any Shares
delivered pursuant to an Option may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall determine that any
(i) subdivision or consolidation of Shares, (ii) dividend or other distribution
(in the form of Shares), (iii) recapitalization or other capital adjustment of
the Company or (iv) merger, consolidation or other reorganization of the
Company or other rights to purchase Shares or other securities of the Company,
or other similar corporate transaction or event (of a type described in
Treasury Regulation Section 1.162-27(e)(2)(iii)(C)), affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner
as it may deem necessary to prevent dilution or enlargement of the benefits or
potential benefits intended to be made under the Plan, adjust any or all of (x)
the number and type of Shares which thereafter may be made the subject of
Options, (y) the number and type of Shares subject to outstanding Options, and
(z) the grant, purchase, or exercise price with respect to an Option or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Option, provided, however, in each case, that (i) with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such adjustment would cause the Plan to violate Section 422 of the Code or
any successor provision thereto; (ii) each such adjustment shall be made in
such manner as not to constitute a cancellation and reissuance of a
Non-Qualified Stock Option for purposes of Section 162(m) of the Code, or the
regulations promulgated thereunder, to the extent that such reissuance would
result in the grant of such Options in excess of the maximum permitted to be
granted to any Participant in any fiscal year; and (iii) the number of Shares
subject to any Option denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
Options may be granted only to Key Employees, Consultants and Non-Employee
Directors; provided, however, that Incentive Stock Options may be granted only
to Key Employees. In determining the Persons to whom Options shall be granted
and the number of Shares to be covered by each Option, the Committee shall take
into account the nature of the Person's duties, such Person's present and
potential contributions to the success of the Company and such other factors as
it shall deem relevant in connection with accomplishing the purposes of the
Plan. A Key Employee or Consultant who has been granted an Option or Options
under the Plan may be granted an additional Option or Options, subject to such
limitations as may be imposed by the Code on the grant of incentive Stock
Options.
A-3
<PAGE>
SECTION 6. OPTION
The Committee is hereby authorized to grant Options to Participants upon
the following terms and the conditions (except to the extent otherwise provided
in Section 7) and with such additional terms and conditions, in either case not
inconsistent with the provisions of the Plan, as the Committee shall determine:
(a) Exercise Price. The purchase price per Share purchasable under
Incentive Stock Options shall not be less than 100% of the Fair Market
Value of a Share on the date of grant; provided that the purchase price
per Share purchasable under Incentive Stock Options granted to Ten Percent
Shareholders shall be not less than 110% of the Fair Market Value of a
Share on the date of grant. The purchase price per Share purchasable under
Non-Qualified Stock Options shall be the price determined by the
Committee.
(b) Option Term. The term of each Non-Qualified Stock Option shall be
fixed by the Committee. The term of each Incentive Stock Option shall in
no event be more than 10 years from the date of grant, or in the case of
an Incentive Stock Option granted to a Ten Percent Shareholder, 5 years
from the date of grant.
(c) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, and
the method or methods by which, and the form or forms in which, payment of
the option price with respect thereto may be made or deemed to have been
made (including, without limitation, (i) cash, Shares, outstanding Options
or other consideration, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant option price and (ii) a
broker-assisted cashless exercise program established by the Committee),
provided in each case that such methods avoid "short-swing" profits to the
Participant under Section 16(b) of the Securities Exchange Act of 1934, as
amended. The payment of the exercise price of an Option may be made in a
single payment or transfer, in installments, or on a deferred basis, in
each case in accordance with rules and procedures established by the
Committee.
(d) Early Termination. The unexercised portion of any Option granted
to a Key Employee or Consultant under the Plan will generally be
terminated (i) thirty (30) days after the date on which the Key Employee's
employment is terminated or the period of the Consultant's services
ceases, as the case may be, for any reason other than (A) Cause (as
defined below), (B) retirement or mental or physical disability, or (C)
death; (ii) immediately upon the termination of the Key Employee's
employment for Cause; (iii) in the case of any Incentive Stock Option,
three months after the date on which the Key Employee's employment is
terminated by reason of retirement or one year after the Key Employee's
employment is terminated by reason of mental or physical disability, or in
the case of any Non-Qualified Stock Option, three months after the date on
which the Key Employee's employment is terminated or the period of the
Consultant's services ceases, as the case may be, by reason of retirement
or mental or physical disability, or in the discretion of the Committee up
to one year after the date on which the Key Employee's employment is
terminated or the period of the Consultant's services ceases, as the case
may be, by reason of retirement or mental or physical disability; or
(iv)(A) 12 months after the date on which the Key Employee's employment is
terminated or the period of the Consultant's services ceases, as the case
may be, by reason of the death of the Key Employee or the Consultant, as
the case may be, or (B) three months after the date on which the Key
Employee or the Consultant, as the case may be, shall die if such death
shall occur during the three-month period following the termination of the
Key Employee's employment or the cessation of the Consultant's services,
as the case may be, by reason of retirement or mental or physical
disability. The term "Cause," as used herein, shall mean (w) the Key
Employee's willful misconduct or fraud in the performance of his duties
under such Key Employee's employment arrangement with the Company, (x) the
continued failure or refusal of the Key Employee (following written notice
thereof) to carry out any reasonable request of the Board for the
provision of services under such Key Employee's employment arrangement
with the Company, (y) the material breach by the Key Employee of his
employment arrangement with the Company or (z) the entering of a plea of
guilty or nolo contendere to or the conviction of the Key Employee for a
felony or any other criminal act involving moral turpitude, dishonesty,
theft or unethical business conduct. For purposes of this paragraph (d),
no act shall be considered willful unless done or omitted to be done not
in good faith and without reasonable belief that such action or omission
was in the best interest of the Company.
A-4
<PAGE>
(e) Incentive Stock Options. All terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision thereto, and any
regulations promulgated thereunder.
(f) No Cash Consideration for Awards. Awards shall be granted for no
cash consideration or such minimal cash consideration as may be required
by applicable law.
(g) Limits on Transfer of Options. Subject to Code Section 422, no
Option and no right under any such Option, shall be assignable, alienable,
saleable, or transferable by a Participant otherwise than by will or by
the laws of descent and distribution; provided, however, that, if so
determined by the Committee, a Participant may, in the manner established
by the Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant, and to receive any property distributable, with
respect to any Option upon the death of the Participant. Each Option, and
each right under any such Option, shall be exercisable during the
Participant's lifetime, only by the Participant or, if permissible under
applicable law with respect to any Option that is not an Incentive Stock
Option, by the Participant's guardian or legal representative. No Option
and no right under any such Option, may be pledged, alienated, attached,
or otherwise encumbered, and any purported pledge, alienation, attachment,
or encumbrance thereof shall be void and unenforceable against the Company
or any Affiliate.
(h) Term of Options. Except as set forth in Section 6(b) and Section
7, the term of each Option shall be for such period as may be determined
by the Committee.
(i) Share Certificates. All certificates for Shares or other
securities of the Company delivered under the Plan pursuant to any Option
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other restrictions of the Securities and
Exchange Commission, any stock exchange upon which such Shares or other
securities are then listed, and any applicable Federal or state securities
laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
SECTION 7. OPTIONS AWARDED TO NON-EMPLOYEE DIRECTORS
Each Non-Employee Director who was a member of the Board on the Effective
Date (defined hereafter) shall automatically be granted on such date a
Non-Qualified Stock Option to purchase 5,000 Shares, subject to all of the
provisions of the Plan. Each person who is either elected or appointed a
Non-Employee Director, and who has not previously received a grant of
Non-Qualified Stock Options pursuant to the Plan, shall automatically be
granted a NonQualified Stock Option to purchase 5,000 Shares on the date of
their appointment or election, subject to the provisions of the Plan. In
addition, each Non-Employee Director who is a member of the Board on April 30
of a year during the term of the Plan beginning in calendar year 1998 shall
automatically be granted a Non-Qualified Stock Option to purchase 2,500 Shares
on May 1 of the following year. All Options granted to Non-Employee Directors
pursuant to the Plan shall (a) be (in the case of a grant under this Section 7)
at an exercise price per Share equal to 100% of the Fair Market Value of a
Share on the date of the grant; (b) have (in the case of a grant under this
Section 7) a term of 10 years; (c) terminate (i) thirty (30) days after
termination of a Non-Employee Director's service as a director of the Company
for any reason other than retirement or mental or physical disability or death,
(ii) thirty (30) days after the date the Non- Employee Director ceases to serve
as a director of the Company due to retirement or physical or mental
disability, or in the discretion of the Committee up to one year after the date
the Non-Employee Director ceases to serve as a director of the Company due to
retirement or physical or mental disability or (iii)(A) 12 months after the
date the Non-Employee Director ceases to serve as a director due to the death
of the Non-Employee Director or (B) three months after the death of the
Non-Employee Director if such death shall occur during the three month period
following the date the Non- Employee Director ceased to serve as a director of
the Company due to physical or mental disability; and (d) be otherwise on the
same terms and conditions as all other Options granted pursuant to the Plan.
A-5
<PAGE>
SECTION 8. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Option Agreement or in the Plan:
(a) Amendments to the Plan. The Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Board, but no amendment without the approval of the shareholders of the
Company shall be made if shareholder approval would be required under Section
162(m) of the Code, Section 422 of the Code, Rule 16b-3 or any other law or
rule of any governmental authority, stock exchange or other self-regulatory
organization to which the Company is subject. Neither the amendment, suspension
or termination of the Plan shall, without the consent of the holder of such
Option, alter or impair any rights or obligations under any Option theretofore
granted.
(b) Adjustments of Options Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
enlargement of the benefits or potential benefits to be made available under
the Plan.
(c) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Option in the manner and to the extent it shall deem desirable
to carry the Plan into effect.
SECTION 9. ELECTION TO HAVE SHARES WITHHELD
(a) In combination with or in substitution for cash withholding or any
other legal method of satisfying federal and state withholding tax liability, a
Participant may elect to have Shares withheld by the Company or to have Shares
sold in a broker-assisted transaction in order to satisfy federal and state
withholding tax liability (a "share withholding election"), provided (i) the
Committee shall have adopted procedures providing for a withholding election;
and (ii) the share withholding election is made on or prior to the date on
which the amount of withholding tax liability is determined (the "Tax Date").
If a Participant elects within thirty (30) days of the date of exercise to be
subject to withholding tax on the exercise date pursuant to the provisions of
Section 83(b) of the Code, then the share withholding election may be made
during such thirty (30) day period. Notwithstanding the foregoing, a holder
whose transactions in Common Stock are subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, may make a share withholding
election only if the following additional conditions are met: (i) the share
withholding election is made no sooner than six (6) months after the date of
grant of the Option, except, however, such six (6) month condition shall not
apply if the Participant's death or disability (as shall be determined by the
Committee) occurs within such six (6) month period; and (ii) the share
withholding election is made (x) at least six (6) months prior to the Tax Date,
or (y) during the period beginning on the third business day following the date
of release of the Company's quarterly or annual financial results and ending on
the twelfth business day following such date.
(b) A share withholding election shall be deemed made when written notice
of such election, signed by the Participant, has been hand delivered or
transmitted by registered or certified mail to the Secretary of the Company at
its then principal office. Delivery of said notice shall constitute an
irrevocable election to have Shares withheld.
(c) If a Participant has made a share withholding election pursuant to
this Section 9, and (i) within thirty (30) days of the date of exercise of the
Option, the Participant elects pursuant to the provisions of Section 83(b) of
the Code to be subject to withholding tax on the date of exercise of the
Option, then such Participant will be unconditionally obligated to immediately
tender back to the Company the number of Shares having an aggregate fair market
value (as determined in good faith by the Committee), equal to the amount of
tax required to be withheld plus cash for any fractional amount, together with
written notice to the Company informing the Company of the Participant's
election pursuant to Section 83(b) of the Code; or (ii) if the Participant has
not made an election pursuant to the provisions of
A-6
<PAGE>
Section 83(b) of the Code, then on the Tax Date, such Participant will be
unconditionally obligated to tender back to the Company the number of Shares
having an aggregate fair market value (as determined in good faith by the
Committee), equal to the amount of tax required to be withheld plus cash for
any fractional amount.
SECTION 10. VESTING LIMITATION ON INCENTIVE STOCK OPTIONS
The Fair Market Value of Shares subject to Incentive Stock Options
(determined as of the date such Incentive Stock Options are granted)
exercisable for the first time by any individual during any calendar year shall
in no event exceed $100,000.
SECTION 11. GENERAL PROVISIONS
(a) No Rights to Awards. No Key Employee or Consultant shall have any
claim to be granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key Employees or Consultants or holders or
beneficiaries of Options under the Plan. The terms and conditions of Options
need not be the same with respect to each recipient.
(b) No Limit on Other Plans. Nothing contained in the Plan shall prevent
the Company or any Affiliate from adopting or continuing in effect other or
additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) No Right to Employment. The grant of an Option shall not be construed
as giving a Participant the right to be retained in the employ of the Company
or any Affiliate. Further, the Company or an Affiliate may at any time dismiss
a Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Option
Agreement.
(d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of New York and applicable Federal law.
(e) Severability. If any provision of the Plan or any Option is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or
would disqualify the Plan or any Option under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan,
such provision shall be deemed void, stricken and the remainder of the Plan and
any such Option shall remain in full force and effect.
(f) No Trust or Fund Created. Neither the Plan nor any Option shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any
other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Option, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(g) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any
rights thereto shall be canceled, terminated, or otherwise eliminated.
(h) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision hereof.
A-7
<PAGE>
SECTION 12. DEDUCTIBILITY OF COMPENSATION
Prior to the end of the "reliance period" as defined in Treasury
Regulation Section 1.162-27(f)(2), the Committee shall take such actions, if
any, that it deems necessary or appropriate so that the compensation element of
Non-Qualified Stock Options will qualify as "qualified performance-based
compensation," within the meaning of Treasury Regulation Section 1.162-27(e).
SECTION 13. EFFECTIVE DATE OF THE PLAN
The Plan is effective as of the closing of the Company's initial public
offering (the "Effective Date").
SECTION 14. TERM OF THE PLAN
The Plan shall continue until the earlier of (i) the date on which all
Options issuable hereunder have been issued, (ii) the termination of the Plan
by the Board or (iii) March 4, 2007. However, unless otherwise expressly
provided in the Plan or in an applicable Option Agreement, any Option
theretofore granted may extend beyond such date and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Option or to waive any conditions or rights under any such Option, and the
authority of the Board to amend the Plan, shall extend beyond such date.
A-8
<PAGE>
[FRONT]
PIVOT RULES, INC.
PROXY
Annual Meeting, October 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. KENNETH SEIFF and JONATHAN MORRIS as
Proxies, each with full power to appoint his substitute, and hereby authorizes
them to appear and vote as designated on the reverse side, all shares of Common
Stock of Pivot Rules, Inc. held on record by the undersigned on September 10,
1998, at the Annual Meeting of Shareholders to be held on October 28, 1998, and
any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
(Continued and to be signed on the reverse side.)
<PAGE>
A
[X] Please mark your votes as in this example.
1. ELECTION OF DIRECTORS VOTE FOR all
nominees listed at
right except as VOTE WITHHELD
marked to the AUTHORITY from all
contrary below nominees
[ ] [ ]
FOR, EXCEPT VOTE WITHHELD AS TO THE FOLLOWING NOMINEES (IF ANY):
- ---------------------------------------------------------------
Nominees: E. Kenneth Seiff
Red Burns
Martin Miller
Cris Popenoe
Robert G. Stevens
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY [ ] [ ] [ ]
THE CORPORATION'S 1997
STOCK OPTION PLAN AS
AMENDED.
3. PROPOSAL TO [ ] [ ] [ ]
APPROVE THE AMENDMENT TO
THE CORPORATION'S RESTATED
CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE
CORPORATION.
4. PROPOSAL TO RATIFY [ ] [ ] [ ]
THE APPOINTMENT OF THE
CORPORATION'S INDEPENDENT
AUDITORS.
5. IN THEIR DISCRETION, THE NAMED PROXIES MAY VOTE ON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING, OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
The undersigned acknowledges receipt of the accompanying Proxy Statement dated
October 2, 1998.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE ANNUAL MEETING IN
ACCORDANCE WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THE PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
- -------------------------------------------------------------------------------
SIGNATURE OF SHAREHOLDER
DATE
- -------------------------------------------------------------------------------
SIGNATURE IF HELD JOINTLY
NOTE: Please mark, date, sign and return this Proxy promptly using the enclosed
envelope. When shares are held by joint tenants, both should sign. If
signing as a attorney, executor, administrator, trustee or guardian,
please give full title. If a corporation or partnership, please sign in
corporate or partnership name by an authorized person.
