<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
<TABLE>
<S> <C>
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use by the Commission Only
[x] Definitive Proxy Statement (As permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CALNETICS CORPORATION
(Name of Registrant as Specified in its Charter)
CALNETICS CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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(1):
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:
(1) Set forth the amount of which the filing fee is calculated and state how it
was determined.
<PAGE> 2
20401 Prairie Street
[LOGO] Chatsworth, California 91311
TO THE SHAREHOLDERS OF CALNETICS CORPORATION:
Attached are a Notice of Meeting and a Proxy Statement for the Annual Meeting
of Shareholders to be held on November 9, 1995. At the Annual Meeting,
shareholders will be asked to elect Directors for the ensuing year and to
approve the adoption of the Company's 1995 Employee Stock Option Plan.
Sincerely,
/s/ CLINTON G. GERLACH
Clinton G. Gerlach
Chairman
/s/ MARY LIVINGSTON
Mary Livingston
Secretary
September 27, 1995
<PAGE> 3
CALNETICS CORPORATION
20401 Prairie Street
Chatsworth, CA 91311
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 9, 1995
The Annual Meeting of Shareholders of Calnetics Corporation, a
California corporation (the "Company"), will be held on Thursday, November 9,
1995, at 10:00 a.m., local time, at the Airtel Plaza Hotel, 7277 Valjean
Avenue, Van Nuys, California 91406, for the following purposes:
1. To elect five (5) Directors to hold office until the next
annual election of Directors by the shareholders, or until
their successors are elected and qualified.
2. To consider and vote upon a proposal to approve the Company's
1995 Employee Stock Option Plan.
3. To transact such other business as may properly come before
the Annual Meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on September
20, 1995 as the record date for determining the shareholders entitled to
receive notice of and vote at the Annual Meeting or at any adjournments or
postponements thereof.
Shareholders are cordially invited to attend the Annual Meeting in
person. In order that your shares may be represented at the Annual Meeting,
whether or not you plan to attend the Annual Meeting in person, please promptly
sign and date the enclosed proxy card and return it in the enclosed envelope,
which requires no postage if mailed in the United States. If you return an
executed proxy and then attend the Annual Meeting in person, you may allow your
proxy to remain in effect, or you may revoke your proxy and vote in person by
giving written notice of such revocation to the Company's Secretary at any time
prior to the exercise of the proxy. Attendance at the Annual Meeting will not
itself revoke a proxy.
By Order of the Board of Directors
/s/ CLINTON G. GERLACH
Clinton G. Gerlach, Chairman of the Board
/s/ MARY LIVINGSTON
Mary Livingston, Secretary
Chatsworth, California
September 27, 1995
<PAGE> 4
CALNETICS CORPORATION
20401 Prairie Street
Chatsworth, California 91311
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 9, 1995
This Proxy Statement and the accompanying form of proxy are being sent
to shareholders of Calnetics Corporation, a California corporation (the
"Company"), on or about September 27, 1995. The accompanying proxy is
solicited by and on behalf of the Board of Directors of the Company for use at
the Annual Meeting of Shareholders of the Company to be held at the Airtel
Plaza Hotel, 7277 Valjean Avenue, Van Nuys, California on Thursday, November 9,
1995 at 10:00 a.m. local time and at any adjournments and postponements thereof
(the "Annual Meeting"), for the purposes stated in the accompanying Notice of
Annual Meeting of Shareholders.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE
ANNUAL MEETING, TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you return an executed proxy
and then attend the Annual Meeting in person, you may allow your proxy to
remain in effect, or you may revoke your proxy and vote in person by giving
written notice of such revocation to the Company's Secretary, or by filing a
duly executed proxy bearing a later date, at any time prior to the exercise of
the proxy. Attendance at the Annual Meeting will not by itself revoke a proxy.
Unless otherwise directed in the accompanying proxy, persons named
therein will vote each proxy FOR (i) the election of the five (5) director
nominees listed below, and (ii) the proposal to approve the Company's 1995
Employee Stock Option Plan. As to any other business that may properly come
before the Annual Meeting, the proxy holders will vote in their discretion.
The Company currently does not know of any other such business.
VOTING SECURITIES
Common shareholders of record at the close of business on September
20, 1995 (the "Record Date") will be entitled to vote on all matters presented
at the Annual Meeting. On the Record Date there were 2,914,799 shares of the
Company's Common Stock (the "Common Stock") outstanding. The presence, either
in person or by proxy, of persons entitled to vote a majority of the
outstanding Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting and any adjournments and
postponements thereof. Abstentions and broker non-votes are counted for the
purpose of determining a quorum, but are not considered as having voted for the
purpose of determining the outcome of a vote. In order for a proposal to be
approved, the votes cast in favor must (i) exceed the votes cast against and
(ii) constitute at least a majority of the required quorum.
<PAGE> 5
On each matter to be considered at the Annual Meeting, Shareholders
will be entitled to cast one vote for each share of Common Stock held on the
Record Date, except that shareholders are entitled to cumulative voting rights
in the election of Directors. Cumulative voting rights entitle a shareholder
either to give one nominee that number of votes equal to the number of
directors to be elected multiplied by the number of shares owned by him or her
on the Record Date, or to distribute such number of votes among two or more
nominees in such proportion as the shareholder may choose. The five nominees
for Director receiving the highest number of votes at the Annual Meeting will
be elected. In order for one or all shareholders to cumulate votes, any one
shareholder must give written notice to the Secretary prior to the voting at
the Annual Meeting of his or her intention to cumulate his or her votes. In
the event anyone other than the five nominees listed herein should be nominated
for election as a Director, the persons named in the proxy to vote such shares
on behalf of the shareholder will have authority, to be executed in their
discretion, to vote cumulatively for less than all the nominees.
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the Record Date by (i) persons
or groups known by the Company to be the beneficial owner of more than 5% of
the Common Stock, (ii) each of the Company's Directors and nominees who own
Common Stock, (iii) each executive officer of the Company named in the Summary
Compensation Table herein and (iv) all Directors and executive officers as a
group. Except as otherwise indicated in the footnotes to the following table,
each of the persons listed below has sole voting and investment power with
respect to the shares of outstanding Common Stock shown as beneficially owned
by such person.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER(1) OWNERSHIP OF CLASS
- -------------- ----------------------- --------------- --------
<S> <C> <C> <C>
Common Stock Clinton G. Gerlach 1,185,504 (2)(6) 41%
Fred E. Edward 202,064 (3)(6) 7%
Raymond H. Heller 71,230 (4)(6) 2%
Michael A. Hornak 111,167 (5)(8) 4%
Steven L. Strawn 106,667 (6)(7)(8) 4%
Lon Schultz 18,167 (9) *
All Directors and Executive
Officers as a Group (7 persons) 1,704,999 58%
</TABLE>
- -------------
* Less than one percent.
(1) Unless otherwise indicated the address of the beneficial owner is
20401 Prairie Street, Chatsworth, California 91311.
(2) Includes 1,085,504 shares held of record by Gerlach Holding
Corporation ("GHC"), a Delaware corporation owned by the following
entities or individuals by the percentages indicated: The Gerlach
Family Trust (52%) and Mr. Gerlach's son and daughter, Clinton G.
Gerlach, II (24%) and Kimberlee Ann Grot (24%). Each of the GHC
shareholders has a right of first refusal on a prorata basis covering
the GHC stock owned by the remaining GHC
2
<PAGE> 6
shareholders pursuant to a right of first refusal agreement dated July
1, 1992. Also includes (i) 10,000 shares held of record by the
Gerlach Family Trust and (ii) 90,000 shares held of record by Mr.
Gerlach's nephew, Charles Gerlach, as to which Mr. Gerlach has sole
voting power.
(3) Held of record by the Fred and Evelyn Edward Family Trust, Fred
Edward, Trustee, (the "Edward Trust").
(4) Held of record by the Raymond H. and Hollyce O. Heller Revocable Trust
of 1982 (the "Heller Trust").
(5) Shares jointly owned with spouse.
(6) Mr. Gerlach has the right of first refusal on a prorata basis covering
the 71,230 shares of Common Stock owned by the Heller Trust and the
202,064 shares of Common Stock owned by Edward Trust, pursuant to
certain right of first refusal agreements, dated as of September 18,
1989. In addition, pursuant to agreements Mr. Gerlach, through GHC,
has rights of first refusal covering (i) 40,000 shares of Common Stock
owned by Steven L. Strawn, Vice President and Director of the Company
and (ii) 85,625 shares of Common Stock owned by other shareholders of
the Company.
(7) Includes presently exercisable options with the Company to acquire
45,000 shares of Common Stock at an exercise price of $1.438 per
share.
(8) Includes presently exercisable options to acquire 16,667 shares of
Common Stock at an exercise price of $2.00 per share but does not
include options to acquire 33,333 shares of Common Stock at an
exercisable price of $2.00 per share which will become exercisable
one-half each in March of 1996 and 1997.
(9) Includes presently exercisable options to acquire 16,667 shares of
Common Stock at an exercise price of $3.00 per share but does not
include options to acquire 33,333 shares of Common Stock at an
exercisable price of $3.00 per share, which will become exercisable
one-half each in July 1996 and 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
the rules issued thereunder, the Directors and executive officers of the
Company are required to timely file with the Securities and Exchange Commission
and with the National Association of Securities Dealers reports of ownership
and changes in ownership of the Common Stock. Copies of such reports are
required to be furnished to the Company. Based solely on its review of the
copies of such reports furnished to the Company, or written representations
that no reports were required, the Company believes that during fiscal 1995 all
of its Directors and executive officers complied with Section 16(a)
requirements, except one report filed late on Form 5 by each of Michael Hornak,
Steven Strawn and Lon Schultz relating to option grants.
3
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Directors are elected at each annual meeting of
shareholders. The number of authorized Directors of the Company is between
five and nine Directors, and is currently set at five. Five Directors are to
be elected at the Annual Meeting to serve until the annual meeting of
shareholders in 1996 and until their respective successors are elected and
qualified. Should any of the nominees decline or be unable to serve as
Director, the persons authorized in the proxy to vote on your behalf will vote
for such substitute nominees as may be recommended by the Company's existing
Board of Directors, unless other directions are given in the proxy. Each of
the nominees has consented to serve as a Director if elected, and the Company
knows of no reason why any nominee listed below would not be available for
election or, if elected, would not be willing or able to serve. Unless
otherwise directed in the accompanying proxy, the persons named therein will
vote FOR the election of the five director nominees listed below.
INFORMATION CONCERNING DIRECTOR NOMINEES
Set forth below is information concerning each of the five nominees for
election as Directors at the Annual Meeting, including his principal occupation
or employment and business experience during the last five years. All nominees
currently serve as Directors.
<TABLE>
<CAPTION>
Name Age Position
- ------------------- ---- -------------------------------
<S> <C> <C>
Clinton G. Gerlach 69 Chairman of the Board, President
and Director
Fred E. Edward 77 Director
Raymond H. Heller 77 Director
Michael A. Hornak 52 Vice President and Director
Steven L. Strawn 41 Vice President and Director
</TABLE>
Clinton G. Gerlach, has served as the President, Chairman of the Board
and Chief Executive Officer of the Company since March of 1988 and the Chairman
of the Board and Director of the Company's subsidiary, Manchester Plastics Co.,
Inc., ("Manchester Plastics") since September 1989, and Director, Chairman of
the Board and Chief Executive Officer of the Company's subsidiary, Ny- Glass
Plastics, Inc. ("Ny-Glass Plastics") since June 1992, and Director and Chairman
of the Board of the Company's subsidiary, Agricultural Products, Inc. ("API")
since June 1994. Mr. Gerlach was
4
<PAGE> 8
the Chairman of the Board and Chief Executive Officer of Gerlach Industries,
Inc. from November 1983 to December 1986 and was the Chairman of the Board and
Chief Executive Officer of Tannetics, Inc. from August 1969 to November 1983.
From January 1987 to March 1988, Mr. Gerlach was self employed. Mr. Gerlach is
also a Director of Zero Corporation (a manufacturer of cases, cabinets, cooling
and cargo enclosures).
Fred E. Edward has been a Director of the Company since 1971. Between
May 1971 and March 1988, Mr. Edward held various offices with the Company,
including Chairman of the Board, President and Chief Executive Officer. For
the past five years, Mr. Edward has been and currently is a private investor.
Raymond H. Heller has been a Director of the Company since 1972. Mr.
Heller was a Vice President in charge of development of Lamson & Sessions
Company (a fastener manufacturing company) from July 1984 to April 1988. From
March 1973 to July 1984, Mr. Heller was the President of Valley-Todeco, Inc. (a
specialty fastener manufacturing company), a division of Lamson & Sessions
Company. For the past five years, Mr. Heller has been and currently is a
business consultant.
Michael A. Hornak has been a Vice President of the Company since 1974
and a Director of the Company since 1984. Mr. Hornak has also been President
of the Ny-Glass Plastics division of the Company since 1985, President and
Director of Ny-Glass Plastics since June 1992, and was President of the Hydro
Flight division of the Company from 1983 to 1985.
Steven L. Strawn has been a Vice President of the Company since
September 1989 and Director since February 1992. Mr. Strawn has also been
President and Director of Manchester Plastics since 1989, and held various
other positions with its predecessor, Manchester Products, from 1980 to 1989.
INFORMATION REGARDING THE BOARD OF DIRECTORS
During fiscal year 1995, there were six (6) meetings of the Board of
Directors. Each Director attended at least 75% of the total number of meetings
of the Board of Directors and the committees of the Board of Directors on which
he serves. Directors who are not employees of the Company received $200 for
each meeting of the Board of Directors or committee meeting attended.
Directors who are not employees of the Company are eligible for the grant of
options under the 1993 Stock Option Plan, but to date no options have been
granted.
COMMITTEES
The Company has no standing committees of the Board of Directors,
other than the Audit Committee and the Stock Option Committee. The principal
duties of the Audit Committee are to nominate the firm of independent outside
auditors for appointment by the Board of Directors; to review the scope of
their audit engagement, and to meet with the Company's financial management
5
<PAGE> 9
and independent outside auditors to discuss matters relating to internal
accounting controls and the results of audits performed by the Company's
independent outside auditors. The members of the Audit Committee are Raymond
H. Heller, Chairman, Fred E. Edward, and Clinton G. Gerlach. The Audit
Committee held one (1) meeting during fiscal 1995.
Mssrs. Edward, Heller and Gerlach also serve on the Stock Option
Committee, the functions of which include making all determinations necessary
for the administration of the Company's 1993 Stock Option Plan. The Stock
Option Committee met once during fiscal 1995.
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth all cash compensation paid or accrued
by the Company for services rendered during each of the three fiscal years
ended June 30, 1995 by the President and Chief Executive Officer and the three
other most highly compensated executive officers of the Company. There were no
other executive officers of the Company whose total annual salary and bonus
exceeded $100,000 in fiscal year 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------
AWARDS
ANNUAL COMPENSATION ------
----------------------------------- SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS (#) COMPENSATION
- ---------------------------- ---- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Clinton G. Gerlach(1) 1995 --- --- --- ---
President, Chief Executive 1994 --- --- --- ---
Officer and Chairman 1993 --- --- --- ---
of the Board
Michael A. Hornak(2) 1995 $ 77,246 $ 5,000 --- $ 7,594
Vice President and President 1994 $ 70,804 $ 5,000 50,000 $ 4,416
of Ny-Glass Plastics 1993 $ 68,400 $ 2,000 --- $ 5,542
Steven L. Strawn(3) 1995 $ 96,181 $ 7,500 --- $10,351
Vice President and President 1994 $ 84,020 $ 5,000 50,000 $10,307
of Manchester Plastics 1993 $ 80,520 $ 2,000 --- $10,273
Lon Schultz(4) 1995 $353,887 $20,000 50,000 $22,749
President and Treasurer 1994 $ 58,333 --- --- $ 4,944
of API
</TABLE>
(1) Receives no compensation for his services in such capacities. The
Company paid $56,000 to GHC during the fiscal year ended June 30,
1995, $54,000 to GHC during the fiscal year ended June 30, 1994, and
$54,000 to GHC during the fiscal year
6
<PAGE> 10
ended June 30, 1993, to reimburse Mr. Gerlach for expenses incurred in
connection with his performance of services for the Company. In
addition, Mr. Gerlach has use of a vehicle owned by the Company.
(2) The Company provides a vehicle for Mr. Hornak and the operating
expense paid by the Company for such vehicle in the fiscal year ended
June 30, 1995 was $7,145, fiscal year ended June 30, 1994 was $4,026,
and fiscal year ended June 30, 1993 was $5,213, and the Company paid
life insurance premiums of $449 for fiscal year ended June 30, 1995,
$390 for the fiscal year ended June 30,1994, and $329 for fiscal year
ended June 30, 1993.
(3) The Company provides a car allowance of $10,000 per fiscal year for
Mr. Strawn, and the Company paid life insurance premiums of $351 for
the fiscal year ended June 30, 1995, $307 for the fiscal year ended
June 30, 1994, and $273 for the fiscal year ended June 30, 1993.
(4) The Company provides a vehicle for Mr. Schultz and the operating
expense paid by the Company for such vehicle in fiscal year ended June
30, 1995 was $7,900 and was $1,380 for fiscal year ended June 30,
1994, and the Company paid life insurance premiums of $9,674 for the
fiscal year ended June 30, 1995 and $2,800 for fiscal year ended June
30, 1994, and Mr. Schultz also received profit sharing of $5,175 for
fiscal year ended June 30, 1995 and $764 for May and June 1994. Mr.
Schultz was not affiliated with the Company prior to the Company's
acquisition of API in fiscal 1994.
STOCK OPTIONS
Until its termination in February 1993, the Company had in effect an
Employee Stock Option Plan (the "1988 Plan") which was adopted by the Board of
Directors of the Company and approved at the 1988 Annual Meeting of
Shareholders. The 1988 Plan provided for the grant of options that qualified
as incentive stock options ("ISOs") under Section 422A of the Internal Revenue
Code, options that did not so qualify ("Non-ISOs") and stock appreciation
rights ("SARs") associated with stock options. The 1988 Plan provided for the
grant of options to purchase up to 275,000 shares of Common Stock, subject to
adjustment in the event of a reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split. Those
that were eligible for awards under the 1988 Plan are key employees. The
exercise price for options granted under the 1988 Plan may not be less than the
fair market value of the stock on the date the options were granted. The term
of each ISO may not exceed ten years and the term of each Non-ISO may not
exceed ten years and one month.
As of June 30, 1995, there were outstanding options to purchase up to
124,000 shares of Common Stock that were granted under the 1988 Plan.
The Company currently has in effect the 1993 Stock Option Plan (the
"1993 Plan") which was adopted by the Board of Directors of the Company and
approved at the 1993 Annual Meeting of Shareholders. The 1993 Plan provides
for the grant of options to purchase up to 250,000 shares of
7
<PAGE> 11
Common Stock, subject to adjustment in the event of a reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse
stock split. Those eligible for the awards under the 1993 Plan are key
employees, including officers and directors. The 1993 Plan is administered by
a committee of three directors which have been appointed by the Board of
Directors. The exercise price for options granted under the 1993 Plan may not
be less than the fair market value of the stock on the date any such option is
granted. The 1993 Plan expires on March 1, 2003 unless previously terminated.
The following options were granted under the 1993 Plan during fiscal
1995:
OPTION GRANTS IN LAST FISCAL YEAR*
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED POTENTIAL REALIZABLE
UNDERLYING TO EXERCISE VALUE AT ASSUMED ANNUAL
OPTIONS EMPLOYEES OR BASE RATES OF STOCK PRICE
GRANTED IN 1995 PRICE EXPIRATION APPRECIATION FOR OPTION TERM(2)
-------------------------------
NAME (#) (%) ($/SH) DATE 5% ($) 10%($)
- ----------------------- ----------- ----------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Clinton G. Gerlach --- --- --- --- --- ---
Michael A. Hornak --- --- --- --- --- ---
Steven L. Strawn --- --- --- --- --- ---
Lon Schultz 50,000(1) 100 3.00 7/18/04 94,000 239,000
</TABLE>
- ----------
* The Company has not granted Stock Appreciation Rights.
(1) These options were granted pursuant to the 1993 Plan on July 18, 1994
and the shares vest in one-third increments in July 1995, 1996 and
1997.
(2) Potential realizable value is based on an assumption that the market
price of the stock appreciates at the stated rate, compounded
annually, from the date of grant to the expiration date. These values
are calculated pursuant to requirements promulgated by the SEC and do
not reflect the Company's estimate of future stock price appreciation.
Actual gains, if any, are dependent on the future market price of the
Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES*
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AS 6/30/95 AT 6/30/95(2)($)
--------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clinton G. Gerlach --- --- --- --- --- ---
Michael A. Hornak --- --- 16,667 33,333 33,334 66,666
Steven L. Strawn 5,000 12,810(1) 61,667 33,333 148,624 66,666
Lon Schultz --- --- --- 50,000 --- 50,000
</TABLE>
- ----------
* The Company has not granted Stock Appreciation Rights.
(1) Represents the difference between the fair market value on the date of
exercise of the option and the exercise price of the option.
(2) Based on the closing price of $4.00 quoted on the NASDAQ National
Daily Quotation Service on June 30, 1995.
8
<PAGE> 12
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
Pursuant to a June 1994 employment agreement, Mr. Schultz agreed to
serve as the President and as a Director of the Company's subsidiary, API, for
an initial term of three years commencing on June 20, 1994. The agreement
provides for a monthly salary of $29,167 and maintenance by API during the term
of the agreement of certain existing life insurance policies covering the life
of Mr. Schultz with a 50% beneficiary named by Mr. Schultz. Under the
agreement, Mr. Schultz is entitled to his monthly salary for the remainder of
the term of the agreement if he is terminated without cause. In the event Mr.
Schultz is terminated for cause or due to death or long-term disability, Mr.
Schultz or his estate shall be entitled to receive a monthly salary of $16,667
for the remainder of the term of the agreement.
PROPOSAL 2
APPROVAL OF 1995 EMPLOYEE STOCK OPTION PLAN
GENERAL
The Company's Board of Directors has adopted the 1995 Employee Stock
Option Plan (the "1995 Plan") effective as of June 14, 1995, subject to
approval by the Company's shareholders. Approval of the 1995 Plan requires the
affirmative vote of a majority of the outstanding shares of Common Stock of the
Company represented and voting in person or by proxy at the Annual Meeting or
any adjournments or postponements thereof. The Board of Directors unanimously
recommends that the shareholders vote FOR approval of the 1995 Plan.
The following is a summary of principal features of the 1995 Plan, and
is qualified in its entirety by reference to the full text of such plan:
PURPOSE AND ELIGIBILITY
The purpose of the 1995 Plan is to promote the interests of the
Company, its subsidiaries and its shareholders by using incentive stock options
(stock options representing the right to purchase Common Stock of the Company
that qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) to attract and retain key
personnel, to encourage and reward their contributions to the performance of
the Company, and to align their interests with the interests of the Company's
shareholders.
Any officer or employee of the Company is eligible to be granted
options under the 1995 Plan. There are approximately 220 such officers and
employees currently eligible to participate in the 1995 Plan.
9
<PAGE> 13
ADMINISTRATION
The 1995 Plan shall be administered by a committee (the "Stock
Option Committee") appointed by the Board of Directors which shall consist of
three Board members, each of whom shall be "disinterested" within the meaning
of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. Subject to the provisions of the 1995 Plan, the Stock Option
Committee shall have the full and final power in its discretion to select the
eligible persons to whom options shall be granted under the 1995 Plan, to
determine the terms of such options, including the number of shares issued
pursuant thereto, to construe the 1995 Plan and any options thereunder, to
determine all questions arising thereunder, to adopt and amend rules to
regulate the 1995 Plan and to otherwise carry out the terms of the 1995 Plan.
PARTICIPATION BY EXECUTIVE OFFICERS AND OTHER EMPLOYEES
The determine of which eligible persons (including executive
officers) will receive options under the 1995 Plan and the number of shares
underlying any such options will be made by the Stock Option Committee in its
sole discretion. Accordingly, future option grants to be received by executive
officers and other employees under the 1995 Plan are not currently
determinable.
SECURITIES SUBJECT TO THE PLAN
No more than 250,000 shares of Common Stock may be issued upon
exercise of options granted under the 1995 Plan. The number of shares of
Common Stock available under the 1995 Plan in general, as well as the number of
shares for which issued or unissued options may be exercised and the exercise
price per share of options will be proportionately adjusted to reflect any
increase or decrease in the number of issued and outstanding shares of Common
Stock resulting from a subdivision or combination of shares, stock dividends,
stock splits, and similar capital stock transactions. The Company's Common
Stock is traded in the over- the-counter market and is quoted in the National
Daily Quotation Service, under the symbol "CALN." On August 25, 1995, the
closing bid for the Company's Common Stock was $4 1/2. No options have been
granted to date under the 1995 Plan.
VESTING, EXERCISE AND TERM
Options granted under the 1995 Plan shall vest and may be
exercised as determined by the Stock Option Committee. The exercise price of
any option granted shall not be less than that amount necessary to enable the
option to qualify as an incentive stock option (generally, 100% of fair market
value of the Company's Common Stock on the date of grant). Options granted
under the 1995 Plan may be exercised at any time after they vest and before
their expiration. The term of an option may be for up to ten years from the
date the option was granted, as determined by the Stock Option Committee,
subject to earlier termination due to termination of the employment of the
option holder.
10
<PAGE> 14
PLAN EFFECTIVENESS AND DURATION
The 1995 Plan became effective June 14, 1995, subject to
shareholder approval, and will continue (unless earlier terminated by the Board
of Directors or the Stock Option Committee) until its expiration on June 14,
2005. Such expiration will not effect any option previously made or granted
which is then outstanding.
AMENDMENT AND TERMINATION
The Board of Directors or the Stock Option Committee may at
any time terminate or amend the 1995 Plan. No such termination will affect
options previously granted, nor may any amendment make any change in any option
previously granted which adversely affects the rights of any participant
without their consent, nor may any amendment be made without shareholder
approval if such amendment would materially increase the number of shares
subject to the 1995 Plan, extend the final date on which options may be
exercised, materially modify employee eligibility for participation
requirements, or materially increase benefits which may accrue to participants
under the 1995 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Pursuant to the 1995 Plan, employees may be granted options
which are intended to qualify as incentive stock options under Section 422 of
the Code. In general, an optionee is not taxed and the Company is not entitled
to a deduction on the grant or exercise of an incentive stock option. However,
if the optionee sells the shares acquired upon exercise of an incentive stock
option at any time within (a) one year after the date of transfer of shares to
the optionee pursuant to exercise of such incentive stock option or (b) two
years after the date of grant of such incentive stock option, then the optionee
will recognize ordinary income in an amount equal to the excess, if any, of the
lesser of the sale price of the shares or the fair market value of the shares
on the date of exercise over the exercise price of such incentive stock option.
In such case, the Company will generally be entitled to a tax deduction in an
amount equal to the amount of ordinary income recognized by such optionee. The
amount by which the fair market value of the shares received upon exercise of
an incentive stock option exceeds the exercise price will be included as a
positive adjustment in the calculation of an optionee's "alternative minimum
taxable income" in the year of exercise.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Board of Directors generally administers the Company's
executive compensation programs as the Company does not have a Compensation
Committee. Individual directors who are also executive officers of the Company
do not participate in decisions regarding their compensation. The Company does
have a Stock Option Committee that is responsible for recommending to the Board
and administering all elements of stock option grants, including
11
<PAGE> 15
determination of recipients of stock options under the Company's plans, the
number of shares underlying all option grants and the other terms applicable to
each option. The Board of Directors reviews and approves salaries of all
elected officers, including those of the executive officers named in the
Summary Compensation Table. The Company's executive compensation programs are
designed to:
# provide competitive levels of base
compensation in order to attract, retain and
motivate high- quality employees;
# tie individual total compensation to
individual performance and the success
of the Company; and
# align the interests of the Company's
executive officers with those of its
shareholders.
BASE SALARY
Base salary is targeted to be moderate yet competitive in
relation to salaries commanded by those in similar positions in comparable
companies. The Board reviews management recommendations for executives'
salaries and examines data for executives with similar responsibilities in
comparable companies in the Company's industry. Individual salary
determinations are based on experience, sustained performance and comparison to
peers inside and outside the Company.
STOCK OPTIONS
The Stock Option Committee administers the Company's option
plans, including the 1993 Plan, and is responsible for the recommendation to
the Board of Directors of stock option grants. The 1993 Plan is designed to
align the interests of management with those of the Company's shareholders.
The number of stock options granted varies by fiscal year in the discretion of
the Stock Option Committee and is related to the recipient's base compensation
and level of responsibility. In past years, option grants have typically been
made to only one or two officers in a given fiscal year.
12
<PAGE> 16
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
At his election Clinton G. Gerlach, the President, Chief
Executive Officer and Chairman of the Board of the Company, serves without
compensation. Mr. Gerlach is reimbursed for various expenses incurred in
connection with his performance of services for the Company, and has use of a
vehicle owned by the Company.
BOARD OF DIRECTORS
Clinton G, Gerlach (Chairman)
Fred E. Edward
Raymond H. Heller
Michael A. Hornak
Steven L. Strawn
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The following current members of the Company's Board of
Directors are current or former officers or employees of the Company: Clinton
G. Gerlach (President, Chief Executive Officer and Chairman of the Board); Fred
E. Edward (former President, Chief Executive Officer and Chairman of the
Board); Michael A. Hornak (Vice President); and Steven L. Strawn (Vice
President). There are no Compensation Committee interlocks between the
Company's Board of Directors and other entities involving the Company's
executive officers and Board members who serve as executive officers or board
members of such other entities.
13
<PAGE> 17
ANNUAL REPORT
A copy of the Company's 1995 Annual Report, which contains
audited financial statements of the Company for the fiscal year ended June 30,
1995, is being mailed with this Proxy Statement to the shareholders of record
on the Record Date, but such Annual Report is not incorporated herein (except
for items specifically incorporated herein) and is not deemed to be a part of
this proxy solicitation material. If any shareholder of record did not receive
such Annual Report, we will immediately mail an Annual Report upon receipt by
the Secretary of the Company of a written request from such shareholder.
A COPY OF THE ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS FOR
THE FISCAL YEAR ENDED JUNE 30, 1995 IS AVAILABLE WITHOUT CHARGE TO ANY
SHAREHOLDER OF THE COMPANY UPON WRITTEN REQUEST TO: CORPORATE SECRETARY,
CALNETICS CORPORATION, 20401 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311. THE
COMPANY WILL FURNISH TO ANY SHAREHOLDER OF THE COMPANY ANY SPECIFIC EXHIBIT(S)
TO THE ANNUAL REPORT UPON WRITTEN REQUEST AND UPON PAYMENT OF THE COMPANY'S
REASONABLE EXPENSES IN FURNISHING ANY SUCH EXHIBIT(S).
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of shareholders intended to be included in next
year's proxy statement and proxy and presented at the 1996 Annual Meeting must
be received in writing by the Secretary of the Company at the address set forth
on the first page of this Proxy Statement by May 30, 1996.
PROXY SOLICITATION
All costs of preparing, printing, assembling, and mailing the
Notice of Annual Meeting of Shareholders, Proxy Statement and the form proxy
and the solicitations of proxies will be borne by the Company. Following the
original mailing of the proxy material, solicitations of proxies may be made by
personal interview, mail, telephone, facsimile or telegram by Directors,
officers, and regular employees of the Company who will not receive additional
compensation for such solicitations. The Company may also request banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries
to forward solicitation material to their principals and the Company will
reimburse them for their expenses.
14
<PAGE> 18
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(Insert Graph)
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
-------------------------------------------------
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
CALNETICS CP 100 45.16 35.48 70.97 83.87 116.13
INDUSTRY INDEX 100 31.25 71.88 85.94 106.25 160.93
BROAD MARKET 100 94.22 101.52 124.62 136.66 160.27
</TABLE>
CERTAIN TRANSACTIONS AND OTHER MATTERS
In connection with the acquisition of API in fiscal year 1994,
the Company issued to certain parties related to Mr. Schultz (the Lon Schultz
Charitable Remainder Unitrust and Leslie Schultz) notes payable of
approximately $124,000 each as part of the consideration for their shares of
API common stock. The notes payable are five-year unsecured notes with
interest payable semi-annually and principal due in four equal annual
installments commencing June 1996.
On June 20, 1994, Mr. Schultz and API entered into a
three-year employment contract whereby Mr. Schultz will serve as President and
a Director of API for a monthly salary of $29,167. API also agreed to maintain
certain existing life insurance policies covering the life of Mr. Schultz
during the term of the employment agreement. Mr. Schultz has designated 50%
beneficiaries with respect to such policies.
On June 20, 1994, API and Story Plastics, Inc., a California
corporation ("Story"), entered into a four-year Parts Purchase and Supply
Agreement whereby Story agreed to supply various injected molded parts to API
and API agreed to purchase such parts as it reasonably needs based on past
purchases of such parts. The agreement by API to purchase its reasonable needs
of such parts from Story decreases each year such that by the fourth year API
is only required to purchase
15
<PAGE> 19
25% of its reasonable needs from Story. Mr. Schultz is a Director of Story and
owns approximately 9% of its outstanding common stock. For the year ending
June 30, 1995, API purchased $1,836,535 in parts from Story.
INDEPENDENT ACCOUNTANTS
The Company has engaged the accounting firm of Arthur Andersen
LLP as independent accountants to audit the Company's financial statements for
the fiscal year ended June 30, 1996. Arthur Andersen LLP has audited the
Company's financial statements since the fiscal year ended June 30, 1993.
One or more representatives of Arthur Andersen LLP are
expected to attend the Annual Meeting with the opportunity to make a statement
if they desire to do so and be available to respond to appropriate questions.
OTHER BUSINESS
The Company is unaware of any other matters to be presented at
the Annual Meeting. If any other matters properly come before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy card to
vote the proxy in accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CLINTON G. GERLACH
Clinton G. Gerlach, Chairman of the Board
/s/ MARY LIVINGSTON
Mary Livingston, Secretary
September 27, 1995
Chatsworth, California
16
<PAGE> 20
CALNETICS CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in the Plan and not otherwise
defined shall have the meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as
amended from time to time. Where the context so requires, a reference to a
particular section of the Code or regulation thereunder shall also be a
reference to any successor provision of the Code to such section or regulation.
(c) "COMMISSION" means the Securities and Exchange
Commission.
(d) "COMMITTEE" means the committee appointed by the
Board to administer the Plan and consisting of three Board members, each of
whom, during such time as one or more Eligible Persons may be subject to
Section l6 of the Exchange Act, shall be "disinterested" within the meaning of
Rule 16b-3 under the Exchange Act; provided however, that the number of members
of the Committee may be reduced or increased from time to time by the Board to
the number required or allowed by Rule 16b-3 under the Exchange Act, as then in
effect.
(e) "COMPANY" means Calnetics Corporation, a California
corporation, and, when appropriate in context, its subsidiaries and/or
affiliates.
(f) "COMMON STOCK" means the common stock of the Company,
without par value.
(g) "ELIGIBLE PERSON" means an officer or key employee of
the Company (as determined by the Committee) other than non-employee directors
of the Company.
(h) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended. Where the context so requires, a reference to a particular
section of the Exchange Act or a rule thereunder shall also refer to any
successor provision to such section or rule.
(i) "FAIR MARKET VALUE" of a share of the Company's
capital stock as of a particular date shall be: (i) if the stock is listed on
an established stock exchange or exchanges (including, for this purpose, The
Nasdaq National Market), the mean between the highest and lowest sale prices of
the stock quoted for such date in the Transactions Index of each such exchange
(as averaged with such mean price as reported on any and all other exchanges),
as published in The Wall Street Journal and determined by the Committee, or, if
no sale price was quoted in any such Index for such date, then as of the next
preceding date on which such a sale price was quoted; or (ii) if the stock is
not then listed on an exchange, the average of the closing bid and asked prices
per share for the stock in the over-the-counter market as quoted on the Nasdaq
system on such date (in the case of (i) or (ii), subject to adjustment as and
if necessary and appropriate to set an exercise price not less than 100% of the
fair market value of the stock on the date an Option is granted); or (iii) if
the stock is not then listed on an exchange or quoted in the over-the-counter
market, an amount determined in good faith by the Committee. The fair market
value of rights or property other than stock shall be determined by the
Committee on the basis of such factors as it may deem appropriate.
(j) "INCENTIVE STOCK OPTION" means an Option that
qualifies as an incentive stock option under Section 422 of the Code and the
regulations thereunder.
(k) "JUST CAUSE DISMISSAL" means a termination of a
Recipient's employment for any of the following reasons: (i) the Recipient
violates any reasonable rule or regulation of the Board or the Recipient's
superiors or the Chief Executive Officer or President of the Company that
results in damage to the Company or which the Recipient fails to correct within
a reasonable time after written notice; (ii) any willful misconduct or gross
negligence by the Recipient in the responsibilities assigned to him or her;
(iii) any willful failure to perform his or her job as required to meet Company
objectives; (iv) any wrongful conduct of a Recipient which has an adverse
impact on the Company or which constitutes a misappropriation of Company
assets; (v) the Recipient's performing services for any other person or entity
which competes with the Company while he or she is employed by the Company,
without the written approval of the Chief Executive Officer or President of the
Company; or (vi) any other conduct that the Board or Committee determines
constitutes Just Cause for Dismissal; provided, however, that if a Recipient is
party to an employment agreement with the Company providing for just cause
dismissal (or comparable notion) of Recipient from his or her employment with
the Company, "Just Cause Dismissal" for purposes of the Plan shall have the
same meaning as ascribed thereto in such employment agreement.
(l) "OPTION" means a right to purchase Common Stock
granted under the Plan. All Options granted hereunder are intended to be
Incentive Stock Options.
(m) "PARENT" means a "parent corporation" as that term is
defined in Section 424(e) of the Code.
(n) "PERMANENT DISABILITY" means that the Recipient
becomes physically or mentally incapacitated or disabled so that he or she is
unable to perform substantially the same services as he or she performed prior
to incurring such incapacity or disability (the Company, at its option and
expense, being entitled to retain a physician to confirm the existence of such
incapacity or disability, and the determination of such physician to be binding
upon the Company and the Recipient), and such incapacity or disability
continues for a period of three consecutive months or six months in any
12-month period or such other period(s) as may be determined by the Committee
with respect to any Option; provided that, for purposes of determining the
period during which an Incentive Stock Option may be exercised pursuant to
Section 3.07(b)(ii) hereof,
<PAGE> 21
Permanent Disability shall mean "permanent and total disability" as defined in
Section 22(e) of the Code.
(o) "PLAN" shall mean this Calnetics Corporation 1995
Employee Stock Option Plan.
(p) "RECIPIENT" means an Eligible Person who has been
granted an Option.
(q) "SECURITIES ACT" shall mean the Securities Act of
1933, as amended.
(r) "SUBSIDIARY" means a "subsidiary corporation" as that
term is defined in Section 424(f) of the Code.
ARTICLE II
GENERAL
2.01 ADOPTION. The Plan has been adopted by the Board and is
effective as of June 14, 1995, subject to approval by the shareholders of the
Company at the Company's 1995 Annual Meeting of Shareholders.
2.02 PURPOSE. The purpose of the Plan is to promote the
interests of the Company and its shareholders by using investment interests in
the Company to attract and retain key personnel, to encourage and reward their
contributions to the performance of the Company, and to align their interests
with the interests of the Company's shareholders.
2.03 ADMINISTRATION. The Plan shall be administered by the
Committee, which, subject to the express provisions of the Plan, shall have the
power to construe the Plan and any option agreements or memoranda defining the
rights and obligations of the Company and Recipients thereunder, to determine
all questions arising thereunder, to adopt and amend such rules and regulations
for the administration thereof as it may deem desirable, and otherwise to carry
out the terms of the Plan and such option agreements and/or confirming
memoranda. The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under the Plan shall be final.
Any action taken by, or inaction of, the Committee relating to the Plan or
Options shall be within the absolute discretion of the Committee and shall be
conclusive and binding upon all persons. No member of the Committee shall be
liable for any such action or inaction except in circumstances involving bad
faith of himself or herself. Subject only to compliance with the express
provisions hereof, the Committee may act in its absolute discretion in matters
related to the Plan or Options. Any action of the Committee with respect to
administration of the Plan shall be taken pursuant to a majority vote or
unanimous written consent of its members. Subject to the requirements of
Section 1.01(d), the Board may from time to time increase or decrease the
number of members of the Committee, remove from membership on the Committee all
or any portion of its members, and appoint such person or persons as it desires
to fill any vacancy existing on the Committee, whether caused by removal,
resignation or otherwise.
2.04 PARTICIPATION. A person shall be eligible to receive
grants of Options under the Plan if, at the time of the Option's grant, he or
she is an Eligible Person.
2.05 SHARES OF COMMON STOCK SUBJECT TO THE PLAN. The shares
that may be issued upon exercise of Options granted under the Plan shall be
authorized and unissued shares of Common Stock, previously issued shares of
Common Stock reacquired by the Company, and unused Option shares pursuant to
Section 3.08. The aggregate number of shares that may be issued upon exercise
of Options granted under the Plan shall not exceed 250,000 shares of Common
Stock, subject to adjustment in accordance with Article IV.
2.06 AMENDMENTS. The Board or the Committee may, insofar as
permitted by law, from time to time suspend or discontinue the Plan or revise
or amend it in any respect whatsoever, except that no such amendment shall
alter or impair or diminish any rights or obligations under any Option
theretofore granted under the Plan without the consent of the person to whom
such Option was granted. In addition, if an amendment to the Plan would
materially increase the number of shares subject to the Plan (as adjusted under
Article IV), materially modify the requirements as to eligibility for
participation in the Plan, extend the final date upon which Options may be
granted under the Plan, or otherwise materially increase the benefits accruing
to recipients in a manner not specifically contemplated herein or affect the
Plan's compliance with Rule 16b-3 under the Exchange Act or applicable
provisions of the Code, the amendment shall be approved by the Company's
shareholders to the extent required to comply with Rule 16b-3 under the
Exchange Act or applicable provisions of or rules under the Code.
Notwithstanding the foregoing, the Board or Committee may amend the Plan to
comply with or take advantage of the rules or regulations (or interpretations
thereof) promulgated under Section 16 of the Exchange Act or under the Code,
subject to the shareholder approval requirement described above.
2
<PAGE> 22
2.07 TERM OF PLAN. Options may be granted under the Plan
until the tenth anniversary of the effective date of the Plan, whereupon the
Plan shall terminate. No Options may be granted during any suspension of this
Plan or after its termination for any reason. Notwithstanding the foregoing,
each Option properly granted under the Plan shall remain in effect until such
Option has been exercised or terminated in accordance with its terms and the
terms of the Plan.
2.08 RESTRICTIONS. All Options granted under the Plan shall
be subject to the requirement that, if at any time the Company shall determine,
in its discretion, that the listing, registration or qualification of the
shares subject to Options granted under the Plan upon any securities exchange
or under any state or federal law, or the consent or approval of any government
or regulatory body or authority, is necessary or desirable as a condition of,
or in connection with, the granting of such an Option or the issuance, if any,
or purchase of shares in connection therewith, such Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company. Unless the shares of stock to be issued upon
exercise of an Option granted under the Plan have been effectively registered
under the Securities Act, the Company shall be under no obligation to issue any
shares of stock covered by any Option unless the person who exercises such
Option, in whole or in part, shall give a written representation and
undertaking to the Company satisfactory in form and scope to counsel to the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares of stock issued to him
or her pursuant to such exercise of the Option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares of stock, and that he or she will make no
transfer of the same except in compliance with any rules and regulations in
force at the time of such transfer under the Securities Act, or any other
applicable law or regulation, and that if shares of stock are issued without
such registration, a legend to that effect may be endorsed upon the securities
so issued, and the Company may order its transfer agent to stop transfers of
such shares.
2.09 NONASSIGNABILITY. No Option granted under the Plan
shall be assignable or transferable except (a) by will or by the laws of
descent and distribution, or (b) subject to the final sentence of this Section
2.09, upon dissolution of marriage pursuant to a qualified domestic relations
order or, in the discretion of the Committee and under circumstances that would
not adversely affect the interests of the Company, pursuant to a nominal
transfer that does not result in a change in beneficial ownership. During the
lifetime of a Recipient, an Option granted to him or her shall be exercisable
only by the Recipient (or the Recipient's permitted transferee) or his or her
guardian or legal representative. Notwithstanding the foregoing, (i) no Option
owned by a Recipient subject to Section 16 of the Exchange Act may be assigned
or transferred in any manner inconsistent with Rule 16b-3 thereunder, and (ii)
Incentive Stock Options may not be assigned or transferred in violation of
Section 422(b)(5) of the Code or the Treasury Regulations thereunder, and
nothing herein is intended to allow such assignment or transfer.
2.10 WITHHOLDING TAXES. Whenever shares of stock are to be
issued upon exercise of an Option granted under the Plan or subsequently
transferred, the Committee shall have the right to require the Recipient to
remit to the Company an amount sufficient to satisfy any federal, state and
local withholding tax requirements prior to the issuance of shares. The
Committee may, in the exercise of its discretion, allow satisfaction of tax
withholding requirements by accepting delivery of stock of the Company or by
withholding a portion of the stock otherwise issuable upon exercise of an
Option.
3
<PAGE> 23
2.11 RIGHTS OF ELIGIBLE PERSONS AND RECIPIENTS. A Recipient
or a permitted transferee of an Option shall have no rights as a shareholder
with respect to any shares issuable or issued upon exercise of the Option until
the date of the receipt by the Company of all amounts payable in connection
with exercise of the Option, including the exercise price and any amounts
required by the Company pursuant to Section 2.10. Status as an Eligible Person
shall not be construed as a commitment that any Option will be granted under
this Plan to an Eligible Person or to Eligible Persons generally. Nothing
contained in this Plan (or in option agreements or confirming memoranda or in
any other documents related to this Plan or to Options granted hereunder) shall
confer upon any Eligible Person or Recipient any right to continue in the
employ of the Company or any subsidiary or constitute any contract or agreement
of employment, or interfere in any way with the right of the Company or any
subsidiary to reduce such person's compensation or other benefits or to
terminate the employment of such Eligible Person or Recipient, with or without
cause. No person shall have any right, title or interest in any fund or in any
specific asset (including shares of capital stock) of the Company or any
subsidiary by reason of any Option granted hereunder. Neither this Plan (or
any documents related hereto) nor any action taken pursuant hereto shall be
construed to create a trust of any kind or a fiduciary relationship between the
Company or any subsidiary and any person. To the extent that any person
acquires a right to receive an Option hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company or any
subsidiary.
2.12 OTHER COMPENSATION PLANS. The adoption of this Plan
shall not affect any other stock option, incentive, or other compensation plans
in effect for the Company, and the Plan shall not preclude the Company from
establishing any other forms of incentive compensation for employees,
directors, or advisors of the Company, whether or not approved by shareholders.
2.13 PLAN BINDING ON SUCCESSORS. The Plan shall be binding
upon the successors and assigns of the Company.
2.14 PARTICIPATION BY FOREIGN EMPLOYEES. Notwithstanding
anything to the contrary herein, the Committee may, consistent with the
purposes of the Plan, modify grants of Options to confer the intended benefits
of the Plan upon Recipients who are foreign nationals or employed outside of
the United States to recognize differences in applicable law, tax policy or
local custom.
ARTICLE III
STOCK OPTIONS
3.01 GRANTS OF OPTIONS. Subject to the express provisions of
this Plan, the Committee may from time to time in its discretion select the
Eligible Persons to whom, and the times at which, Options shall be granted, and
shall determine the terms of such Options (which need not be identical) and the
number of shares of Common Stock for which each may be exercised. Each Option
shall be subject to the terms and conditions of the Plan and such other terms
and conditions established by the Committee as are not inconsistent with the
purpose and provisions of the Plan. One or more Options may be granted to any
Eligible Person. Options granted hereunder are intended to be Incentive Stock
Options; provided, however, that if any Option granted hereunder fails or
ceases to qualify as an Incentive Stock Option, such Option shall thereafter be
treated as a nonqualified stock option.
4
<PAGE> 24
3.02 EXERCISE PRICE.
(a) Setting the Exercise Price. The exercise price for
each Option shall be determined by the Committee at the date such Option is
granted and shall not be less than the amount as is necessary to enable such
Option to be treated as an "incentive stock option" within the meaning of
Section 422 of the Code. If the Recipient is the owner of stock (as determined
under Section 424(d) of the Code) possessing 10% or more of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation (such individual to be designated a "10% Shareholder"), then the
exercise price for each Option granted to the 10% Shareholder shall not be less
than 110% of the Fair Market Value of the Common Stock on the effective date of
the grant. The Committee, with the consent of the Recipient, may, subject to
compliance with statutory or administrative requirements applicable to
Incentive Stock Options, amend the terms of any Option to provide that the
exercise price of the shares remaining subject to the Option shall be
reestablished at a price not less than 100% of the Fair Market Value of the
Common Stock on the effective date of the amendment, or effect a reduction in
exercise price by cancellation of an existing option and grant of a replacement
option at an exercise price not less than 100% of the Fair Market Value of the
Common Stock on the effective date of the grant. No modification of any other
term or provision of any Option which is amended in accordance with the
foregoing shall be required, although the Committee may, in its discretion,
make such further modifications of any such Option as are not inconsistent with
the Plan.
(b) Payment of the Exercise Price. The exercise price
shall be payable upon the exercise of an Option in legal tender of the United
States or capital stock of the Company delivered in transfer to the Company by
or on behalf of the person exercising the Option duly endorsed in blank or
accompanied by stock powers duly endorsed in blank, with signatures guaranteed
in accordance with the Exchange Act if required by the Committee, or retained
by the Company from the stock otherwise issuable upon exercise or surrender of
vested and exercisable options previously granted to the Recipient and being
exercised (in either case valued at Fair Market Value as of the exercise date),
or such other consideration as the Committee may from time to time in the
exercise of its discretion deem acceptable in any particular instance;
provided, however, that the Committee may, in the exercise of its discretion,
(i) allow exercise of an Option in a broker-assisted or similar transaction in
which the exercise price is not received by the Company until promptly after
exercise, and/or (ii) allow the Company to loan the exercise price to the
person entitled to exercise the Option, if the exercise will be followed by a
prompt sale of some or all of the underlying shares and a portion of the sale
proceeds is dedicated to full payment of the exercise price and amounts
required pursuant to Section 2.10.
3.03 OPTION PERIOD AND VESTING.
(a) Initial Determination. Options granted hereunder
shall vest and may be exercised as determined by the Committee, except that
exercise of Options after termination of the Recipient's employment shall be
subject to Section 3.07. Each Option granted hereunder and all rights or
obligations thereunder shall expire on such date as shall be determined by the
Committee, but not later than ten years after the date the Option is granted,
or five years after the date of grant in the case of a recipient of an
Incentive Stock Option who at the time of grant is a 10% Shareholder, and shall
be subject to earlier termination as herein provided.
(b) Acceleration and Extension. The Committee may in its
discretion at any time and from time to time after the grant of an Option with
the consent of the Recipient accelerate or extend the vesting or exercise
period of the Option in whole or part.
3.04 EXERCISE OF OPTIONS. Except as otherwise provided
herein, an Option may become exercisable, in whole or in part, on the date or
dates specified by the Committee and thereafter shall remain exercisable until
the expiration or earlier termination of the Option. No Option shall be
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded. Not less than 100 shares of stock (or such other amount
as is set forth in the applicable option agreement or confirming memorandum)
may be purchased at one time and Options must be exercised in multiples of 100
unless the number purchased upon exercise is the total number at the time
available for purchase under the terms of the Option. An Option shall be
deemed to be exercised when the Secretary of the Company receives written
notice of such exercise from the Recipient, together with payment of the
exercise price and any amounts required under Section 2.10. Notwithstanding
any other provision of the Plan, the Committee may impose, by rule or in option
agreements or confirming memoranda, such conditions upon the exercise of
Options (including, without limitation, conditions limiting the time of
exercise to specified periods) as may be required to satisfy applicable
regulatory requirements, including without limitation Rule 10b-5 or Rule 16b-3
(or any successor rule) under the Exchange Act and any applicable section of or
regulation under the Code.
3.05 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS. The
aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the stock for which one or more Options granted to any recipient
under the Plan (or any other option plan of the Company or any of its
subsidiaries or affiliates) may for the first time become exercisable as
Incentive Stock Options under the federal tax laws during any one calendar year
shall not exceed $100,000. Any Options granted as Incentive Stock Options
pursuant to the Plan in excess of such limitation shall be treated as
nonqualified stock options (options that are not Incentive Stock Options).
3.06 OPTION AGREEMENTS OR MEMORANDA. Each Option granted
under the Plan shall be evidenced by an option agreement duly executed on
behalf of the Company and by the Recipient or, in the Committee's discretion, a
confirming memorandum issued by the Company to the Recipient, stating the
number of shares of Common Stock issuable upon exercise of the Option, the
exercise price, the time or times during which the Option is exercisable, and
the time or times at which the Option vests and becomes exercisable. Such
option agreements or confirming memoranda may but need not be identical and
shall comply with and be subject to the terms and conditions of the Plan, a
copy of which shall be provided to each Recipient and incorporated by reference
into each option agreement or confirming memorandum. Any option agreement or
confirming
5
<PAGE> 25
memorandum may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Committee.
3.07 TERMINATION OF EMPLOYMENT.
(a) Termination for Cause. Except as otherwise provided
in a written agreement between the Company and a Recipient, which may be
entered into at any time before or after termination, in the event of a Just
Cause Dismissal of the Recipient, all of the Recipient's unexercised Options,
whether or not vested, shall expire and become unexercisable as of the date of
such Just Cause Dismissal.
(b) Termination other than Just Cause Dismissal. Subject
to subsection (a) above and subsection (c) below, and except as otherwise
provided in a written agreement between the Company and the Recipient or a
confirming memorandum issued by the Company to the Recipient with the
Recipient's consent, which may be entered into or delivered at any time before
or after termination, in the event of a Recipient's termination of employment
for:
(i) any reason other than Just(Cause Dismissal,
death or Permanent Disability, the Recipient's unexercised Options,
whether or not vested, shall expire and become unexercisable as of the
earlier of (A) the date such Options would expire in accordance with
their terms if the Recipient remained employed or (B) three months
after the date of termination.
(ii) death or Permanent Disability, the Recipient's
unexercised Options, whether or not vested, shall expire and become
unexercisable as of the earlier of (A) the date such Options would
expire in accordance with their terms if the Recipient remained
employed or (B) twelve months after the date of termination.
(c) Alteration of Vesting and Exercise Periods.
Notwithstanding anything to the contrary in Sections 3.07(a) or (b), the
Committee may in its discretion pursuant to Section 3.03(b) designate shorter
or longer periods to exercise Options following a Recipient's termination of
employment. Options shall be exercisable by a Recipient (or his or her
successor in interest) following such Recipient's termination of employment
only to the extent that installments thereof had become exercisable on or prior
to the date of such termination unless the vesting period is extended beyond
the termination date pursuant to Section 3.03(b).
3.08 UNUSED OPTION SHARES. In the event that any
outstanding Option under the Plan expires by reason of lapse of time or is
otherwise terminated without exercise for any reason, then the shares of stock
subject to any such Option that have not been issued upon exercise of the
Option shall again become available in the pool of shares of stock for which
Options may be granted under the Plan.
ARTICLE IV
CORPORATE TRANSACTIONS
4.01 ANTI-DILUTION ADJUSTMENTS. The number of
shares of Common Stock available for issuance upon exercise of Options granted
under the Plan, the number of shares for which each Option can be exercised and
the exercise price per share of Options shall be appropriately and
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other
increase or decrease in the number of issued and outstanding shares of capital
stock of the Company effected without receipt of consideration by the Company.
No fractional interests will be issued under the Plan resulting from any such
adjustments. The preceding sentence shall not result in an adjustment to the
terms of an Incentive Stock Option unless such adjustment either (a) would not
cause the Option to lose its status as an Incentive Stock Option or (b) is
agreed to in writing by the Committee and the Recipient.
4.02 REORGANIZATIONS; MERGERS; CHANGES IN CONTROL.
Subject to the other provisions of this Section 4.02, if the Company shall
consummate any reorganization or merger or consolidation in which holders of
shares of the Company's Common Stock are entitled to receive in respect of such
shares any other consideration (including, without limitation, a different
number of such shares), each Option outstanding under the Plan shall thereafter
be exercisable, in accordance with the Plan, only for the kind and amount of
securities, cash and/or other property receivable upon such reorganization or
merger or consolidation by a holder of the same number of shares of Common
Stock as are subject to that Option immediately prior to such reorganization or
merger or consolidation, and any appropriate adjustments will be made to the
exercise price thereof. In addition, if a Change in Control (as defined below)
occurs and in connection with such Change in Control any Recipient is
terminated as an employee of the Company, then, subject to the terms of any
written employment agreement between the Company and the Recipient, such
Recipient shall have the right to exercise his or her Options granted under the
Plan in whole or in part during the applicable time period provided in Section
3.07 without regard to any vesting requirements. For purposes hereof, but
without limitation, a Recipient will be deemed to have been terminated as an
employee of the Company in connection with a Change in Control if (i) the
Recipient is removed from his or her employment with the Company by or resigns
his or her employment with the Company upon request of a Person (as defined in
paragraph (a) below) exercising practical voting control over the Company
following the Change in Control or a person acting upon authority or at the
instruction of such Person, or (ii) the Recipient's position is eliminated as a
result of a reduction in force made to reduce overcapacity or unnecessary
duplication of personnel within 90 days after the consummation of the Change in
Control. For purposes hereof, a "CHANGE IN CONTROL" means the following and
shall be deemed to occur if any of the following events occur:
(a) Any person, entity or group, within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), but excluding the Company and its subsidiaries and any
employee benefit or stock ownership plan of the Company or its
subsidiaries and also excluding an underwriter or underwriting
syndicate that has acquired the Company's securities solely in
connection with a public offering thereof (such person, entity or group
being referred to herein as a "Person"), becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated
6
<PAGE> 26
under the Exchange Act) of 50% or more of either the then outstanding
shares of Common Stock or the combined voting power of the Company's
then outstanding securities entitled to vote generally in the election
of directors; or
(b) Individuals who, as of the effective date
hereof, constitute the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors of the Company, provided that any
individual who becomes a director after the effective date hereof whose
election, or nomination for election by the Company's shareholders, is
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered to be a member of
the Incumbent Board unless that individual was nominated or elected by
any Person having the power to exercise, through beneficial ownership,
voting agreement and/or proxy, 20% or more of either the then
outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally
in the election of directors, in which case that individual shall not
be considered to be a member of the Incumbent Board unless such
individual's election or nomination for election by the Company's
shareholders is approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; or
(c) Consummation by the Company of the sale or other
disposition by the Company of all or substantially all of the
Company's assets or a reorganization or merger or consolidation of the
Company with any other person, entity or corporation, other than
(i) a reorganization or merger or
consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto (or, in the case of a
reorganization or merger or consolidation that is preceded or
accomplished by an acquisition or series of related acquisitions by any
Person, by tender or exchange offer or otherwise, of voting securities
representing 5% or more of the combined voting power of all securities
of the Company, immediately prior to such acquisition or the first
acquisition in such series of acquisitions) continuing to represent,
either by remaining outstanding or by being converted into voting
securities of another entity, more than 50% of the combined voting
power of the voting securities of the Company
7
<PAGE> 27
or such other entity outstanding immediately after such
reorganization or merger or consolidation (or series of related
transactions involving such a reorganization or merger or
consolidation), or
(ii) a reorganization or merger or
consolidation effected to implement a recapitalization or
reincorporation of the Company (or similar transaction) that does not
result in a material change in beneficial ownership of the voting
securities of the Company or its successor; or
(d) Approval by the shareholders of the Company or
an order by a court of competent jurisdiction of a plan of
liquidation of the Company.
4.03 DETERMINATION BY THE COMMITTEE. To the extent that
the foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive. The grant of an Option pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all of any part of its business or assets.
8
<PAGE> 28
CALNETICS PROXY
CORPORATION
20401 Prairie Street, Chatsworth, California 91311
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael A. Hornak and Steven L. Strawn, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of common stock of Calnetics Corporation held of record by the
undersigned on September 20, 1995, at the annual meeting of shareholders to be
held on November 9, 1995, or any adjournments thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary below) to vote for all nominees below
Nominees: Fred E. Edward, Clinton G. Gerlach, Raymond H. Heller, Michael A.
Hornak, Steven L. Strawn
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. To approve adoption of the Company's 1995 Employees Stock Option Plan.
For [ ] Against [ ] Abstain [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the election of the nominees set forth in item 1 and FOR approval of
the 1995 employees stock option plan as set forth in item 2.
If cumulative voting procedures are involved at the meeting, and this Proxy
card is "FOR" the nominees listed on the reverse side, or if no direction is
given, the designated Proxies are authorized to distribute votes represented by
this proxy in their discretion so as to elect the maximum number of management
nominees which may be elected by cumulative voting.
DATED:__________________ 1995
_____________________________
Signature
_____________________________
Signature if held jointly
Please sign exactly as name
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, as executor, admin-
istrator, trustee or guardian,
please give full title as such.
If a corporation, please sign
in full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
