<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ONTRO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[Company Logo]
_____________________________________
PRINCIPAL EXECUTIVE OFFICE
13250 GREGG STREET
POWAY, CALIFORNIA 92064
_____________________________________
To Ontro Shareholders:
Ontro, Inc.'s 1999 Annual Meeting will be held in the Solana/Miramar
room at the Holiday Inn at 9335 Kearny Mesa Road, San Diego, California
92126, on June 11, 1999, at 2:00 p.m. San Diego Time. The formal notice and
proxy statements follow.
The Directors and Officers of the Corporation invite your attendance at
the meeting. Whether or not you plan to attend the meeting, we would
appreciate your completing and returning the accompanying proxy which, of
course, may be revoked at any time before the meeting.
The Company's 1998 Form 10-KSB is enclosed herewith.
Sincerely yours,
James A. Scudder
CHAIRMAN OF THE BOARD
April 30, 1999
<PAGE>
- --------------------------------------------------------------------------------
TO ENSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE DATE, SIGN AND MAIL PROMPTLY
THE ENCLOSED PROXY, FOR WHICH
A RETURN ENVELOPE IS PROVIDED.
- --------------------------------------------------------------------------------
[Company Logo]
_____________________________________
NOTICE OF ANNUAL MEETING
_____________________________________
The Annual Meeting of Shareholders of Ontro, Inc. will be held in the
Solana/Miramar room at the Holiday Inn at 9335 Kearny Mesa Road, San Diego,
California 92126, on June 11, 1999, at 2:00 p.m. San Diego Time, for the
following purposes:
1. To elect five Directors for the ensuing year;
2. To approve an amendment to the Company's 1996 Stock Plan, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 500,000 shares;
3. To ratify the appointment of KPMG, LLP as the Company's 1999
Independent Auditors; and
4. To transact such other business as may properly come before the
meeting.
The record date for determination of the stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournments thereof is the
close of business on April 12, 1999. For ten days prior to the meeting, a
complete list of stockholders entitled to vote at the meeting will be
available at the offices of the Company for examination during business hours
by any stockholder for any purpose relating to the meeting.
Whether or not you expect to attend the Annual Meeting in person, please
complete, sign, date and promptly return the enclosed proxy in the envelope
provided, which requires no postage if mailed in the United States.
By Order of the Board of Directors
Kevin A. Hainley
SECRETARY
April 30, 1999
Poway, California
1
<PAGE>
ONTRO, INC.
13250 GREGG STREET
POWAY, CALIFORNIA 92064
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 1999
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by or on behalf of the Board of Directors ("Board") of ONTRO, Inc., a
California corporation (the "Company"), for use at the Company's 1999 Annual
Meeting of Shareholders to be held on June 11, 1999, in the Solana/Miramar
room at the Holiday Inn at 9335 Kearny Mesa Road, San Diego, California
92126, at 2:00 p.m. and at any and all adjournments thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders.
REVOCABILITY OF PROCESS
Any shareholder may revoke his or her proxy by delivering written notice of
revocation to the Secretary of the Company at its principal office, 13250 Gregg
Street, Poway, California 92064, by a delivery of proxy bearing a later date,
or by attendance at the Annual Meeting and voting in person.
SOLICITATION
This Proxy Statement and the Form 10-KSB of the Company for the year ended
December 31, 1998, will be mailed on or about April 30 to each shareholder of
record as of the close of business on April 12, 1999.
The solicitation of proxies is being made by use of the mails. The cost of
preparing, assembling and mailing these proxy materials will be paid by the
Company. Following the mailing of this Proxy Statement, directors, officers
and regular employees of the Company may solicit proxies by mail, telephone,
email or personal interview. Such persons will receive no additional
compensation for such services. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of the Company's common
stock of record will be requested to forward proxy soliciting material to the
beneficial owners of the shares, and will be reimbursed by the Company for
their reasonable out-of pocket expenses incurred in forwarding these
materials.
VOTING
When your proxy is returned properly signed, the shares represented will be
voted in accordance with your directions. Where specific choices are not
indicated, proxies will be voted in favor of the five persons nominated to be
directors in Proposal One and in favor of Proposals Two and Three. If a proxy
indicates that a shareholder or nominee abstains from voting or that shares
are not to be voted on a particular proposal, the shares will not be counted
as having been voted on that proposal, and those shares will not be reflected
in the final tally of the votes cast with regard to that proposal, although
such shares will be counted as in attendance at the Annual Meeting for
purposes of determining a quorum. Additionally, broker non-votes are not
counted as votes cast on any matter to which they relate.
The presence at the Annual Meeting in person or by proxy of the holders of a
majority of the shares of Common Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum for the transaction of business.
Holders of Common Stock are entitled to one vote per share on all matters
brought before the Annual Meeting and to cumulate votes for the election of
directors. A shareholder may not cumulate votes unless the shareholder has
announced at the Annual Meeting the intention to do so before the voting has
begun, but if any shareholder makes such an announcement, all shareholders
may cumulate votes. Cumulative voting rights entitle a shareholder to give
one nominee as many votes as are equal to the number of directors to be
elected, multiplied by the number of shares owned by the shareholder, or to
distribute his or her votes as the shareholder sees fit among two or more
nominees on the same principle, up to the total number of nominees to be
elected. The five nominees for director receiving the highest number of votes
at the Annual Meeting from the holders of Common Stock will be elected.
2
<PAGE>
The Company's Articles of Incorporation provide that the shareholder's right
to cumulative voting will terminate automatically when the Common Stock of
the Company is listed on Nasdaq NMS, NYSE or AMEX, provided the Company has
at least 800 shareholders as of the record date for the most recent meeting
of its shareholders. The absence of cumulative voting may have the effect of
limiting the ability of minority shareholders to effect changes in the Board
of Directors and may have the effect of deterring hostile takeovers delaying
or preventing changes in control or management of the Company.
An affirmative vote of a majority of the shares represented and voting at the
Annual Meeting is required for approval of Proposal One, Proposal Two and
Proposal Three.
Directors and officers beneficially own approximately 16.5% of the outstanding
shares of Common Stock. The directors and officers have indicated that they
intend to vote for each of the nominees for director and in favor of Proposals
Two and Three.
RECORD DATE
The Company had 6,489,478 shares of Common Stock, no par value (the "Common
Stock"), outstanding as of April 12, 1999. Holders of record of shares of the
Common Stock at the close of business on April 12, 1999, will be entitled to
notice of and to vote at the Annual Meeting and will be entitled to one vote
for each such share. All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate affirmative and
negative votes, absentees and broker non-votes.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information concerning the ownership of the
Company's Common Stock as of April 12, 1999, by (i) all persons known to the
Company to be beneficial owners of more than 5% of the outstanding Common
Stock, (ii) each director and nominee for director of the Company, (iii) each
executive officer of the Company, and (iv) all executive officers and
directors of the Company as a group. Except as otherwise indicated, and
subject to applicable community property and similar laws, the persons named
have sole voting and investment power with respect to the securities owned by
them.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of
of Shareholder (1) Beneficially Owned Outstanding Shares
- ------------------ ------------------ ------------------
<S> <C> <C>
James L. Berntsen 460,589 (2) 7.1%
Robert F. Coston 10,000 (3) *
Ann T. Davern 41,196 (4) *
Kevin A. Hainley 49,166 (5) *
James A. Scudder 567,940 (6) 8.7%
L.L. Knickerbocker Co., Inc. 858,673 13.2%
30005 Comercio
Rancho Santa Margurita, CA 92688
William D. Corneliuson 684,500 (7) (8) 10.5%
777 East Wisconsin Ave., Suite 3020
Milwaukee, WI 53202
Heartland Advisors, Inc. 333,900 (8) 5.5%
790 North Milwaukee St.
Milwaukee, WI 53202
Wellington Management Company, LLP 360,000 (8) 5.1%
75 State Street,Boston, MA 02109
All Directors and Executive 1,128,891 (9) 17.2%
Officers as a Group (7 Persons)
</TABLE>
* Less than 1%
3
<PAGE>
(1) The address for all directors and executive officers is 13250 Gregg Street,
Poway, California, 92064.
(2) Includes 6,666 shares subject to stock options exercisable within 60 days
of April 12, 1999.
(3) Includes 10,000 shares subject to stock options exercisable within 60 days
of April 12, 1999.
(4) Includes 5,166 shares subject to stock options exercisable within 60 days
of April 12, 1999.
(5) Includes 29,166 shares subject to stock options exercisable within 60 days
of April 12, 1999.
(6) Includes 6,666 shares subject to stock options exercisable within 60 days
of April 12, 1999.
(7) Includes 420,500 publicly traded warrants exercisable within 60 days of
April 12, 1999.
(8) As reported on Form 13-G filed December 31, 1998.
(9) Includes 57,664 shares subject to stock options exercisable within 60 days
of April 12, 1999.
PROPOSAL 1
ELECTION OF DIRECTORS
The persons named below have been nominated by management for election as
directors of the Company to serve until the 2000 Annual Meeting of
Shareholders or until their respective successors are duly elected and
qualify. All nominees are currently serving as directors of the Company.
Unless otherwise instructed, the enclosed proxy will be voted for election of
the nominees listed below, except that the persons designated as proxies
reserve full discretion to cast their votes for another person recommended by
management in the unanticipated event that any nominee is unable to or
declines to serve. The Board has no reason to believe that any nominee will
be unable or unwilling to serve. The five (5) candidates receiving the
highest number of affirmative votes of the shares entitled to vote at the
Annual Meeting will be elected Directors of the Company. The Company's
Articles of Incorporation provide for a classified Board of Directors
designated as Class I and Class II. After the initial term of office of each
class, each class shall have a term of two years. At each annual meeting of
shareholders thereafter, directors of one class could be elected to succeed
the directors of that class whose terms have expired, and each newly elected
director will serve a two-year term. Under California law, the classified
director provisions are automatically effective when the Common Stock of the
Company is listed on the Nasdaq NMS, NYSE or AMEX, and when the Company has
at least 800 shareholders as of the record date for the most recent annual
meeting of shareholders. The classification of directors has the effect of
making it take more time to change the composition of a majority of the Board
of Directors.
MANAGEMENT AND THE BOARD OF DIRECTORS
RECOMMEND A VOTE IN FAVOR OF EACH NOMINEE.
NOMINEES
Set forth below is information regarding the nominees, including information
furnished by them as to their principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were
selected as directors or nominees, and their ages as of April 12, 1999.
<TABLE>
<CAPTION>
Name of Nominee Age Position with the Company
- --------------- --- -------------------------
<S> <C> <C>
James L. Berntsen 42 Executive Vice President and Director
Robert F. Coston 66 Director
Douglas W. Moul 63 Director
James A. Scudder 42 Chairman, President, Chief Executive Officer and Director
Carroll E. Taylor 58 Director
</TABLE>
James L. Berntsen, a co-founder of the Company has been a director of the
Company since its inception in November, 1994. He currently serves as
Executive Vice President and Assistant Secretary.
Robert F. Coston has been a director since October, 1997. Mr. Coston has been
a self-employed consultant since 1990, specializing in production and
distribution of various food products. Mr. Coston holds a Bachelor of Science
in Civil Engineering from Lehigh University.
4
<PAGE>
Douglas W. Moul has been a director since December, 1997. Mr. Moul is a
director of Morgan Foods Inc. of Austin, Indiana and holds a Bachelor of
Science in Mechanical Engineering from the University of British Columbia. He
has been a consultant for the last five years.
James A. Scudder, a co-founder of the Company has been a director of the
Company since its inception in November, 1994. He currently serves as
Chairman of the Board, President and Chief Executive Officer.
Carroll E. Taylor has been a director since September, 1998. He holds a
Bachelor of Science in Chemical Engineering from the University of Southern
California and an MBA from the University of Cincinnati. He is a private
investor.
There is no family relationship between any of the Company's directors and
officers. There are no arrangements or understandings between any director or
executive officer and any other person pursuant to which any person has been
elected or nominated as a director or executive officer. All directors and
executive officers currently serve for a term of one year until the next
Annual Meeting of Shareholders until such time, if ever, as the classified
board applies.
During the year ended December 31, 1998, the Board held seven (7) meetings
where all directors were present except Mr. Taylor who joined the Board in
September, 1998 and Mr. Coston, who was absent for one meeting. The Company
presently has a Compensation Committee of the Board consisting of Messrs.
Coston, Moul and Taylor. The Compensation Committee's primary function is to
establish compensation for executives and officers. The Audit Committee,
consisting of Messrs. Coston, Moul, and Taylor, advises the Board as to the
selection of the Company's independent accountants, reviews with the
independent accountants the accounting principles and practices followed by
the Company and the adequacy thereof, approves the Company's annual audit and
financial results and any material change thereto and makes recommendations
to the Board regarding such matters. The Board does not have a standing
Nominating Committee. During 1998, the Compensation Committee met two times
and the Audit Committee met two times.
Executive Officers
In addition to those listed above, the following individuals are also Executive
Officers:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Ann T. Davern 46 Vice President, Manufacturing
Kevin A. Hainley 42 Chief Financial Officer
</TABLE>
DIRECTOR COMPENSATION
Beginning in May 1998, non-employee directors of the Company received $2,000
for each Board meeting they attended. Non-employee Directors are also
compensated $1,000 per day for any consulting services they provide the
Company. Additionally, non-employee directors each received stock options to
purchase 50,000 shares of Common Stock upon their appointments as Directors.
These options vest evenly over five years. Each of the non-employee directors
was appointed to the Advisory Board and received stock options to purchase
20,000 shares of Common Stock. These options vest evenly over four years.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than
10% of the Company's stock, to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% beneficial owners are
required by applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company and information involving securities transactions of which the
Company is aware, the Company believes that during the fiscal year ending
December 31, 1998, all its executive officers, directors and greater than 10%
beneficial shareholders complied with Section 16(a) filing requirements.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for the years indicated certain compensation
of the Company's Chief Executive Officer and each of the other four (4) most
highly-compensated of the Company's executive officers who earned or who were
paid more than $100,000 in compensation in such years ("Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation(1)
Annual Compensation -------------------------
Name and --------------------- No. of shares
Principal Position Year Salary underlying Options
- ------------------ ---- ------ ------------------
<S> <C> <C> <C>
James L. Berntsen 1998 $176,900 40,000
Executive Vice President 1997 97,200
1996 62,000
Ann T. Davern 1998 121,080 31,000
Vice President, Manufacturing 1997 68,300
1996 49,800
Kevin A. Hainley 1998 127,200 31,000
Chief Financial Officer 1997 96,100
1996 ---- 60,000
Allan C. Mayer, Jr. 1998 119,400 24,000
Vice President, Marketing 1997 96,000
1996 16,000 60,000
James A. Scudder 1998 172,300 40,000
Chief Executive Officer 1997 97,200
and President 1996 62,000
</TABLE>
(1) There were no cash bonuses, other annual compensation or restricted
stock awards paid or granted and the dollar value of other annual
compensation was not required to be disclosed
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning stock option grants made
to the Company's Chief Executive Officer and each of the other Named
Executive Officers during the fiscal year ended December 31, 1998. No stock
appreciation rights were granted or exercised during such fiscal year.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted Exercise or
Options To Employees Base Price
Name Granted (1) In Fiscal Year per Share Expiration
- ---- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C>
James L. Berntsen 80,000 21.1% $1.88 2004
Ann T. Davern 62,000 16.3% $1.88 2004
Kevin A. Hainley 62,000 16.3% $1.88 2004
Allan C. Mayer, Jr. 48,000 12.6% $1.88 2004
James A. Scudder 80,000 21.1% $1.88 2004
</TABLE>
(1) Each referenced individual received two options. One half of the option
grants as to each individual vest incrementally every six (6) months over three
(3) years. The remaining one-half of the option grants as to each individual
vest on July 1, 1999, in an amount computed by a formula based on the Company's
performance as measured against specific goals of: (i) manufacturing capacity;
(ii) licensing commitments, and (iii) cash availability on June 30, 1999.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information concerning exercises of options and
the fiscal year end option values during the fiscal year ended December 31,
1998 with respect to the Company's Chief Executive Officer and each of the
other Named Executive Officers. No options were exercised and no stock
appreciation rights were exercised or outstanding during such fiscal year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options At 12-31-98 Options At 12-31-98
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James L. Berntsen 6,666 33,334 $ 9,132 $45,668
Ann T. Davern 5,166 25,834 7,077 35,392
Kevin A. Hainley 29,166 49,834 61,077 89,393
Allan C. Mayer, Jr. 40,000 44,000 86,480 81,400
James A. Scudder 6,666 33,334 9,132 45,668
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has employment agreements with Messrs. Scudder and Berntsen. Mr.
Scudder's employment agreement provides for his employment by the Company as
its President and Chief Executive Officer at a current salary of $178,000.
Mr. Berntsen's employment agreement provides for his employment by the
Company as its Executive Vice President at a current salary of $151,200.
Messrs. Scudder and Berntsen are party to agreements providing for an initial
term expiring on August 31, 1999 and such agreements were extended by the
Board of Directors for a term ending August 31, 2002. Each officer may receive
bonuses awarded in the discretion of the Board of Directors. The agreements
do not provide for any fixed or formula bonuses to be paid to the officers.
The Employment Agreements provide that Messrs. Scudder and Berntsen may, at
their election, receive a severance payment equal to 299% of their average
annual base salary and bonuses during the preceding five year period in the
event of a change of control as defined in their employment agreements.
PROPOSAL 2
APPROVE AN AMENDMENT TO THE COMPANY'S 1996 STOCK PLAN
TO AUTHORIZE AN INCREASE IN THE COMMON STOCK AVAILABLE FOR ISSUANCE
The Company's 1996 Stock Plan was adopted by the Board of Directors in
November 1996 and approved by the shareholders in December 1996. 545,500
shares of the Company's Common Stock are currently reserved for issuance
pursuant to options granted pursuant to the 1996 Stock Plan, of which options
to acquire 517,000 shares of Common Stock have been granted as of April 12,
1999. As a result, there are 28,500 shares of Common Stock available for
future grant under the 1996 Stock Plan.
In February of 1999, the Board of Directors approved an amendment to the
1996 Stock Plan, subject to shareholder approval, to enable the Board of
Directors and the Compensation Committee to continue to grant stock options,
stock appreciation rights and other stock awards to the Company's employees,
directors, consultants and advisors at levels determined to be appropriate by
the Board of Directors and the Compensation Committee. The amendment increases
the number of shares to a total of 1,045,400; an increase of 500,000 shares
over the number previously authorized under the 1996 Stock Plan.
The shareholders are required in this Proposal 2 to approve the amendment
to the 1996 Stock Plan. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and entitled to vote on
the proposal at the meeting, will be required to approve the 1996 Stock Plan
as amended.
MANAGEMENT AND THE BOARD OF DIRECTORS
RECOMMEND A VOTE IN FAVOR OF PROPOSAL 2.
DESCRIPTION OF THE 1996 STOCK OPTION PLAN
The essential features of the Company's 1996 Stock Plan, as amended are
outlined below. The description of the 1996 Stock Plan set forth below is a
summary and does not purport to be complete.
PURPOSE. The purpose of the 1996 Stock Plan is to provide an incentive to
eligible employees, officers, directors, and consultants, whose present and
potential contributions are important to the continued success of the
Company, to afford these individuals the opportunity to acquire a proprietary
interest in the Company, and to enable the Company to enlist and retain in
its employment qualified personnel for the successful conduct of its
business. It is intended this purpose will be effected through the granting
of: (i) Stock Options, including incentive stock options ("Incentive Stock
Options") under Section 422 of the Internal Revenue Code and non-qualified
stock options ("Non-qualified Stock Options") which are not intended to meet
the requirements of such section; (ii) stock appreciation rights ("Stock
Appreciation Rights"); (iii) restricted stock ("Restricted Stock"); and (iv)
long-term performance awards ("Long-Term Performance Awards").
7
<PAGE>
ELIGIBILITY. Officers, directors, consultants, and other employees of the
Company whom the Board of Directors deems to have the potential to contribute
to the success of the Company shall be eligible to receive awards under the
1996 Stock Plan. The 1996 Stock Plan provides that Non-qualified Stock
Options, Stock Appreciation Rights, Restricted Stock, and Long-Term
Performance Awards may be granted to employees (including officers),
directors, and consultants of the Company or any parent or subsidiary of the
Company. The 1996 Stock Plan provides Incentive Stock Options may only be
granted to employees (including officers) of the Company or any parent or
subsidiary of the Company.
ADMINISTRATION. The 1996 Stock Plan is administered by the Board of
Directors, or a duly appointed committee thereof. Subject to the provisions
of the 1996 Stock Plan, the Board of Directors or a committee thereof has
full power to select the eligible individuals to whom awards will be granted,
to make any combination of awards to any participant and to determine the
specific terms of each grant. The interpretation and construction of any
provision of the 1996 Stock Plan by the Board of Directors shall be final and
conclusive. The Board of Directors shall have discretion in determining the
number of shares and other terms of each option granted to each recipient.
Each option grant shall be evidenced by an option agreement that shall
specify the option price, the duration of the option, the number of shares to
which the option pertains, the percentage of the option that may be exercised
on specified dates in the future, and such other provisions as the Board of
Directors shall determine.
OPTION PRICE AND EXERCISE. The option price for each grant of an option
shall be determined by the Board of Directors, provided that, in the case of
Incentive Stock Options, the option price shall not be less than the fair
market value of a share of the Company's Common Stock, or in the case of
Incentive Stock Options granted to the holder of 10% or more of the Company's
Common Stock, at least 110% of the fair market value of such shares on the
date of grant.
All options granted under the 1996 Stock Plan shall expire no later than 10
years from the date of grant, subject to the limitations set forth in the
1996 Stock Plan. Options may be granted authorizing exercise by payment to
the Company of cash or by surrender of shares of the Company's Common Stock
already owned by the employee, a combination of cash and such shares, or such
other consideration as is approved by the Board of Directors.
The 1996 Stock Plan places limitations on the exercise of options under
certain circumstances upon or after termination of employment or in the event
of the death, disability, or termination associated with a change in control
(as defined in the 1996 Stock Plan) of the Company. At the discretion of the
Board of Directors the agreement evidencing the grant of a stock option may
contain additional limitations upon the exercise of the option under
specified circumstances, or may provide certain limited rights to exercise
such options under specified circumstances. The granting of an option under
the 1996 Stock Plan does not accord the recipient the rights of a
shareholder, and such rights shall only accrue after the exercise of an
option, and the issuance of the underlying shares of Common Stock in the
recipient's name.
RESTRICTED STOCK AWARDS. The 1996 Stock Plan provides for the award of
shares of Common Stock of the Company which are subject to certain
restrictions ("Restricted Stock") provided in the 1996 Stock Plan or
otherwise determined by the Board of Directors. Restricted Stock awards
pursuant to the 1996 Stock Plan will be represented by a stock certificate
registered in the name of a recipient to whom the award is made subject to
the restrictions upon which it is granted. Upon the grant of Restricted
Stock, such recipient will be entitled to vote the Restricted Stock, and to
exercise other rights as a shareholder of the Company, including the right to
receive all dividends and other distributions paid or made with respect to
the Restricted Stock. Pursuant to the 1996 Stock Plan, a Restricted Stock
award recipient may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of the Restricted Stock during the restriction period
designated by the Board of Directors, except by testamentary disposition, or
as may otherwise be determined by the Board of Directors. When the conditions
of a Restricted Stock award established by the Board of Directors lapse or
are satisfied, the Company will deliver stock certificates representing the
shares of Common Stock which are no longer subject to any restrictions,
except those required by applicable law.
STOCK APPRECIATION RIGHTS. Pursuant to the 1996 Stock Plan, the Board of
Directors in its discretion may grant Stock Appreciation Rights ("SARS"). A
Stock Appreciation Right generally will entitle the holder to receive money
or stock from the Company in an amount equal to the excess, if any, of the
aggregate fair market value of the Company's Common Stock which is subject to
such right over the fair market value of the same stock on the date of grant.
The Company may grant SARs allowing for the payment of the amount to which
the participant exercising the SAR is entitled by delivering shares of the
Company's Common Stock or cash or a combination of stock and cash as the
Board of Directors in its sole discretion may determine. SARs may contain
additional rights, limitations, terms, and conditions which the Board of
Directors otherwise deems desirable.
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LONG-TERM PERFORMANCE AWARDS. The 1996 Stock Plan also permits the granting
of Long-Term Performance Awards. Such awards, if issued, are anticipated to
be based upon Company, subsidiary, and/or individual performance over
designated periods based on such performance factors or other criteria as the
Board of Directors deems appropriate. Performance objectives may vary from
participant to participant, group to group, and period to period. Such awards
will generally be granted for no cash consideration. The Board of Directors
may adjust Long-Term Performance Awards as they deem necessary or appropriate
in order to avoid windfalls or hardships or to compensate for changes in tax,
accounting, legal rules, or other circumstances. Long-Term Performance Awards
may be payable in cash or Common Stock (including Restricted Stock).
RESTRICTION ON TRANSFER. Options, SARs, Restricted Stock Awards, and
Long-Term Performance Awards granted pursuant to the 1996 Stock Plan, will
generally be nontransferable by the participant, other than by will or by the
laws of descent and distribution, and may generally be exercised only by the
participant during the lifetime of the participant.
CHANGE IN CONTROL PROVISIONS. Subject to the 1996 Stock Plan's change in
control provisions, in the event of a sale of all or substantially all of the
assets of the Company or the merger of the Company with or into another
corporation, each outstanding Option, SAR, Restricted Stock Award, or
Long-Term Performance Award shall be assumed or substituted by such successor
corporation or a parent or subsidiary of such successor corporation. In the
event the successor corporation does not agree to such assumption or
substitution, the administrators shall, in lieu of such assumption or
substitution, provide for the participant to have the right to exercise the
Option, SAR, Restricted Stock Award, or Long-Term Performance Award as to all
or a portion of the Common Stock subject to the option, including shares of
Common Stock as to which the option would not otherwise be exercisable.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is based
on current statutes, regulations and interpretations. This description is not
intended to address specific tax consequences applicable to an individual
participant and does not address special rules that may be applicable to
directors, officers and greater-than-10% stockholders of the Company.
OPTION. There will not be any federal income tax consequences to either the
participant or the Company as a result of the grant to a participant of an
Incentive Option under the 1996 Plan. The exercise by a participant of an
Incentive Option will also not result in any federal income tax consequences
to the Company or the participant, except that an amount equal to the excess
fair market value of the shares acquired upon exercise of the Incentive
Option, determined at the time of exercise, over the consideration paid for
the shares by the participant will be a tax preference item for purposes of
the alternative minimum tax. Upon the exercise of a Non-Statutory Option, a
participant will recognize ordinary income on the date of exercise in an
amount equal to the difference between the fair market value of the shares
purchased and the consideration paid for the shares. In general, the Company
will be entitled to a compensation expense deduction in connection with the
exercise of a Non-Statutory Option for any amounts includable in the taxable
income of a participant as ordinary income.
If a participant disposes of the shares acquired upon exercise of an
Incentive Option, the federal income tax consequences will depend upon how
long the participant has held the shares. If the participant does not dispose
of the shares within two years after the Incentive Option was granted, nor
within one year after the participant exercised the Incentive Option and the
shares were transferred to the participant, then the participant will
recognize a long-term capital gain or loss. The amount of the long-term
capital gain or loss will be equal to the difference between (i) the amount
the participant realized on disposition of the shares and (ii) the option
price at which the participant acquired the shares. The Company is not
entitled to any compensation expense deduction under these circumstances.
If the participant does not satisfy both of the above holding period
requirements, then the participant will be required to report as ordinary
income, in the year the participant disposes of the shares, the amount by
which the lesser of the fair market value of the shares at the time of
exercise of the Incentive Option or the amount realized on the disposition of
the shares (if the disposition is the result of a sale or exchange to one
other than a related taxpayer) exceeds the option price for the shares. The
Company will be entitled to a compensation expense deduction in an amount
equal to the ordinary income includable in the taxable income of a
participant. The remainder of the gain or loss recognized on the disposition,
if any, will be treated as long-term or short-term capital gain or loss,
depending on the holding period.
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STOCK APPRECIATION RIGHTS. A participant who receives a Stock Appreciation
Right will not recognize any taxable income at the time of grant. Upon
exercise of a Stock Appreciation Right, the participant will realize ordinary
income in an amount equal to the cash and fair market value of any shares of
Common Stock received by the participant. The Company will receive a
corresponding tax deduction for any amounts includable by the participant as
ordinary income.
RESTRICTED STOCK AWARDS AND CASH AND STOCK BONUSES. With respect to shares
issued pursuant to a Restricted Stock Award that are not subject to risk of
forfeiture or with respect to stock bonuses, a participant will include as
ordinary income in the year of receipt an amount equal to the fair market
value of the shares received on the date of receipt. With respect to shares
that are subject to a risk of forfeiture, a participant may file an election
under Section 83(b) of the Code within 30 days after the transfer to include
as ordinary income in the year of transfer an amount equal to the fair market
value of the shares received on the date of transfer (determined as if the
shares were not subject to any risk of forfeiture). If a Section 83(b)
election is made, the participant will not recognize any additional income
when the restrictions on the shares issued in connection with the Restricted
Stock Award lapse. The Company will receive a corresponding tax deduction for
any amounts includable by the participant as ordinary income.
A participant who does not make a Section 83(b) election within 30 days of a
Restricted Stock Award that is subject to a risk of forfeiture will recognize
ordinary income at the time of the lapse of the restrictions in an amount
equal to the then fair market value of the shares freed of restrictions. The
Company will receive a corresponding tax deduction for any amounts includable
by the participant as ordinary income.
EXCISE TAX ON PARACHUTE PAYMENTS. The Internal Revenue Code ("Code") imposes
a 20% excise tax on the recipient of "excess parachute payments," as defined
in the Code, and denies tax deductibility to the Company for such excess
parachute payments. Generally, parachute payments are payments in the nature
of compensation to employees of a company who are officers, shareholders or
highly compensated employees, which payments are contingent upon a change in
control of a company. Acceleration of the vesting of options and rights upon
a change in control of the Company may constitute parachute payments and in
certain cases, "excess parachute payments." The 1996 Stock Plan does not
limit the acceleration of such vesting to avoid excess parachute payments.
SECTION 162(m). Under Section 162(m) of the Code, the deductibility of
certain compensation paid to the chief executive officer and each of the four
other most highly compensated executives of publicly held companies is
limited to $1,000,000. Compensation for this purpose generally includes any
items of compensation expense described above in connection with options and
rights under the 1996 Stock Plan. However, certain types of compensation are
excepted from this limit, including compensation that qualifies as
"performance-based compensation." Under Section 162(m), any compensation
expense resulting from the exercise of Options or Stock Appreciation Rights
under the 1996 Stock Plan with exercise prices equal to (or greater than) the
fair market value of the Common Stock on the date of grant should qualify as
"performance-based compensation" excepted from the limit of Section 162(m).
However, compensation expense in connection with any other options and rights
under the 1996 Stock Plan would be subject to this limit.
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PROPOSAL 3
RATIFICATION AND SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG, LLP as independent auditors of the
Company for the fiscal year ending December 31, 1999, it being intended that
such appointment would be presented for ratification by the shareholders.
KPMG, LLP has audited the company's financial statements since its inception
in 1994.
A representative of KPMG, LLP is expected to be present at the Annual Meeting.
The representative will have an opportunity to make a statement and will be
available to respond to appropriate questions from shareholders. The
affirmative vote of a majority of the shares present in person or represented
by proxy and entitled to vote on the proposal at the meeting will be required
to ratify the selection of KPMG, LLP.
MANAGEMENT AND THE BOARD OF DIRECTORS
RECOMMEND A VOTE IN FAVOR OF PROPOSAL 3.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS - FOR 2000 ANNUAL MEETING
Any proposal relating to a proper subject which a shareholder may intend to
present for action at the 2000 Annual Meeting of Shareholders and which such
shareholder may wish to have included in the Company's proxy materials for
such meeting must, in accordance with the provisions of Rule 14a-8
promulgated under the Securities Exchange Act of 1934, be received in proper
form by the Company at its principal executive office not later than
December 1, 1999. It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
FORM 10-KSB ANNUAL REPORT
The Company files an Annual Report on Form 10-KSB with the SEC. A copy of the
Annual Report on Form 10-KSB (excluding exhibits) including financial
statements and schedules has been included with the mailing of this proxy to
all shareholders. Shareholders may obtain additional copies of these reports,
including financial statements and financial statement schedules, without
charge, by writing to Kevin A. Hainley, Chief Financial Officer of the
Company, at the Company's executive offices at 13250 Gregg Street, Poway,
California 92064.
OTHER BUSINESS
Management is not aware of any matters to come before the Annual Meeting
other than those stated in this Proxy Statement. However, inasmuch as matters
of which management is not now aware may come before the Annual Meeting or
any adjournment thereof, the proxies confer discretionary authority with
respect to acting thereon, and the persons named in such proxies intend to
vote, act, and consent in accordance with their best judgment with respect
thereto. Upon receipt of such proxies (in the form enclosed and properly
signed) in time for voting, the shares represented thereby will be voted as
indicated thereon and in this Proxy Statement.
By Order of the Board of Directors,
Kevin A. Hainley
Secretary
Poway, California
April 30, 1999
11
<PAGE>
PROXY
ONTRO, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James A. Scudder and Kevin A. Hainley,
jointly and severally, as proxies, each with power to act without the other
and with the power to appoint his substitute, and hereby authorizes them to
represent and vote all of the shares of Common Stock of Ontro, Inc. held of
record by the undersigned on April 12, 1999 standing in the name of the
undersigned, as designated on the reverse hereof side, with all powers which
the undersigned would possess if present at the Annual Meeting of the
Stockholders to be held on June 11, 1999, or any postponements or
adjournments thereof and to vote in his or her discretion on such other
business as may properly come before the Meeting and any adjournments thereof.
(Continued, and to be marked, dated and signed, on the other side)
^ FOLD AND DETACH HERE ^
<PAGE>
<TABLE>
<S><C>
Please mark /X/
your votes as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.
FOR WITHHELD FOR AGAINST ABSTAIN Unless otherwise specified
ITEM 1. ELECTION OF DIRECTORS / / / / ITEM 2. APPROVAL OF AMENDMENT TO 1996 / / / / / / by the undersigned, this
Nominees: STOCK OPTION PLAN proxy will be voted FOR
James L. Berntsen proposals 1, 2 and 3 and
Robert F. Coston ITEM 3. RATIFICATION OF KPMG, LLP AS / / / / / / will be voted by the
Douglas W. Moul INDEPENDENT AUDITORS proxy-holder at his
James A. Scudder discretion as to any other
Caroll E. Taylor matters properly transacted
at the Meeting or any
WITHHELD FOR: (write that nominee's name(s) adjournments thereof. To
in the space provided below). vote in accordance with the
Board of Directors'
recommendations, just sign
- --------------------------------------------- below, no boxes need to be
checked.
Signature Signature Date
---------------------------------------- ---------------------------------------- -----------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If the shares are owned by a corporation, sign in full corporate name by the President
or other authorized officer. If the shares are owned by a Partnership, sign in the name of the Partnership name by an authorized
person. Please mark, sign, date and return the Proxy promptly using the enclosed envelope.
</TABLE>
^ FOLD AND DETACH HERE ^
