SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 |_|
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|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
DREXLER TECHNOLOGY CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
Not Applicable
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
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|_| Fee paid previously with preliminary materials.
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"PRELIMINARY COPY"
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[LOGO OF DREXLER TECHNOLOGY CORPORATION]
1077 Independence Avenue
Mountain View, California 94043-1601
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NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, SEPTEMBER 22, 2000
2:00 P.M.
To the Stockholders:
The 2000 Annual Meeting of Stockholders of Drexler Technology Corporation
(the "Company") will be held in the Edwards Room at Hyatt Rickeys of Palo Alto,
4219 El Camino Real, Palo Alto, California, on Friday, September 22, 2000, at
2:00 p.m., for the following purposes:
1. to elect directors;
2. to approve an amendment to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock
authorized for issuance from 15,000,000 shares to 30,000,000 shares;
3. to approve an amendment to the Company's Stock Option Plan to
increase the number of shares reserved for issuance thereunder by
300,000 shares;
4. to approve an amendment to the Company's Employee Stock Purchase
Plan to increase the number of shares reserved for issuance
thereunder by 100,000 shares; and
5. to transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on Wednesday, July
26, 2000, are entitled to notice of and to vote at this meeting and at any
continuation or adjournment thereof.
By Order of the Board of Directors
JERALD E. ROSENBLUM
Secretary
Mountain View, California
August ____, 2000
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YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD, AS PROMPTLY AS POSSIBLE, IN THE ENCLOSED ENVELOPE. IF A
QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF RE-ISSUING
THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING, AND SO DESIRE, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
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TABLE OF CONTENTS
Page
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General Information........................................................ 1
PROPOSAL 1: Election of Directors.......................................... 2
Nominees.............................................................. 2
Board Meetings and Committees......................................... 2
Director Compensation................................................. 2
Stock Ownership by Directors and Executive Officers................... 3
Required Vote for Approval of Proposal 1.............................. 4
PROPOSAL 2: Approval of an Amendment to the Company's Certificate of
Incorporation to Increase the Number of Authorized Shares of Common
Stock from 15,000,000 to 30,000,000 Shares................................. 4
Required Vote for Approval of Proposal 2.............................. 5
PROPOSAL 3: Approval of an Amendment to the Company's Stock Option
Plan to Increase the Number of Shares Reserved for Issuance Thereunder
by 300,000 Shares.......................................................... 5
Summary of Stock Option Plan.......................................... 6
Recent Amendments to Stock Option Plan................................ 7
Required Vote for Approval of Proposal 3.............................. 7
PROPOSAL 4: Approval of an Amendment to the Company's Employee Stock
Purchase Plan to Increase the Number of Shares Reserved for Issuance
Thereunder by 100,000 Shares............................................... 7
Summary of Employee Stock Purchase Plan............................... 8
Required Vote for Approval of Proposal 4.............................. 8
Executive Officers......................................................... 8
Executive Compensation..................................................... 9
Aggregated Option Exercises and Options Held by Executive Officers......... 9
Corporate Tax Deductibility of Executive Compensation...................... 10
Compensation Committee Interlocks and Insider Participation................ 10
Employment Contracts, Termination of Employment, and Change in
Control Arrangements....................................................... 10
Section 16(a) Beneficial Ownership Reporting Compliance.................... 10
Principal Stockholders..................................................... 10
Stock Performance Chart.................................................... 11
Availability of Form 10-K.................................................. 11
Compensation Committee Report.............................................. 12
Independent Public Accountants............................................. 12
Proxy Cost and Solicitation................................................ 12
Stockholder Proposals for the 2001 Annual Meeting.......................... 12
Other Matters; Timely Proposals............................................ 13
Appendix A: Audit Committee Charter Adopted May 16, 2000.................. 13
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Voting Shares Held in Your Own Name
If your shares are held directly in your name with Drexler Technology's
transfer agent, ChaseMellon Shareholder Services, you are receiving a Drexler
Technology proxy card on which to vote. Whether or not you plan to attend the
meeting, please sign and return the proxy card in the enclosed envelope as
promptly as possible. Postage is not needed if the envelope is mailed in the
United States.
Voting Shares Held in "Street Name"
If your shares are held by your broker ("street name") you are receiving a
voting instruction form from your broker, asking you how your shares should be
voted. Please complete the form and return it to your broker in the envelope
provided by the broker; no postage is necessary if mailed in the United States.
If you do not instruct your broker how to vote, your broker will vote your
shares at its discretion. Also, a number of brokers and banks participate in a
program, provided through ADP Investor Communication Services, that offers
telephone and Internet voting options to "street name" stockholders. Please
check your voting instruction form to determine if you can use these voting
methods.
"Street name" stockholders may attend the 2000 Annual Meeting and vote in
person by contacting the broker or agent in whose name the shares are
registered, to obtain a broker's proxy showing the number of shares you owned
beneficially on July 26, 2000. You must bring the broker's proxy to the annual
meeting in order to vote in person.
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DREXLER TECHNOLOGY CORPORATION
1077 Independence Avenue, Mountain View, California 94043
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 22, 2000
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Drexler Technology Corporation, a Delaware corporation (the "Company"), for use
at the 2000 Annual Meeting of Stockholders of the Company, to be held in the
Edwards Room at Hyatt Rickeys of Palo Alto, 4219 El Camino Real, Palo Alto,
California, at 2:00 p.m. on Friday, September 22, 2000. Only stockholders of
record on Wednesday, July 26, 2000, will be entitled to vote. At the close of
business on that date, the Company had outstanding 9,886,303 shares of Common
Stock.
Stockholders are entitled to one vote for each share held. All duly
executed proxy cards received prior to the meeting will be voted at the annual
meeting in accordance with the instructions of the stockholder. If no specific
instructions are given, the shares represented by proxies will be voted as
follows:
o FOR the election of the Board's nominees as directors as set forth
in this Proxy Statement;
o FOR approval of an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 15,000,000 to 30,000,000 shares;
o FOR approval of an amendment to the Company's Stock Option Plan to
increase the number of shares reserved for issuance thereunder by
300,000 shares; and
o FOR approval of an amendment to the Company's Employee Stock
Purchase Plan to increase the number of shares reserved for issuance
thereunder by 100,000 shares.
In addition, if other matters come before the annual meeting, the persons named
in the accompanying form of proxy will vote in accordance with their best
judgment with respect to such matters. Any stockholder giving a proxy in the
form accompanying this Proxy Statement has the power to revoke it prior to its
exercise. A proxy may be revoked by filing with the Secretary of the Company,
prior to the meeting, an instrument revoking it, by duly executing a proxy
bearing a later date which is presented to the meeting, or by attending the
meeting and electing to vote in person.
The required quorum for the transaction of business at the annual meeting
is a majority of the shares entitled to vote, represented in person or by proxy.
Shares that are duly voted "FOR," "AGAINST," or "ABSTAIN" on any matter are
treated as being present at the meeting for purposes of establishing a quorum.
The Company intends to count abstentions and broker non-votes (which occur
when shares held by brokers or nominees for beneficial owners are voted on some
matters but not on others in the absence of instructions from the beneficial
owners) for the purpose of establishing the presence or absence of a quorum for
the transaction of business, but not as votes cast with respect to the election
of directors or for or against any other proposal that may come before the
meeting. Abstentions and broker non-votes would to this extent have no effect on
the outcome of the election of directors or the vote on any proposal.
This Proxy Statement is being mailed to stockholders of record on or about
August ___, 2000.
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PROPOSAL 1: ELECTION OF DIRECTORS
Nominees
The authorized number of directors to be elected at this meeting is five.
The following persons, all of whom are currently members of the Company's Board
of Directors, have been nominated for election as directors to serve until the
next annual meeting of stockholders and until their successors are duly elected
and qualified: Jerome Drexler, Arthur H. Hausman, Dan Maydan, William E.
McKenna, and Walter F. Walker. As explained above, all proxies solicited hereby
will be voted for the election of the five nominees unless authority to vote for
one or more nominees is withheld in accordance with the instructions on the
proxy card.
The table on page 3 contains information with respect to the Company's
directors and executive officers and the num ber of shares and percentage of the
Company's Common Stock beneficially owned by each of them and by all directors
and executive officers as a group, as of July 26, 2000. The beneficial owners of
the shares have full voting and investment power, except as indicated in the
table, and subject to community property laws, where applicable, and have
addresses in care of the Company. There are no family relationships among any
directors or executive officers of the Company. As of the close of business on
July 26, 2000, the Company had outstanding 9,886,303 shares of Common Stock.
Board Meetings and Committees
The Board of Directors held four meetings during the 2000 fiscal year
ended March 31, 2000. The Board has standing Audit, Compensation, and Stock
Option Committees. There is no nominating committee. During the 2000 fiscal
year, the Stock Option Committee held two meetings, the Compensation Committee
held no meetings, and the Audit Committee held three meetings. During the 2000
fiscal year, Dr. Maydan attended less than 75% of the meetings of the Board of
Directors. All other Board and committee meetings were attended by all members
during the 2000 fiscal year.
The Audit Committee is generally responsible for overseeing and monitoring
the participation of both management and the independent accountants in the
Company's financial reporting process. The Audit Committee confers with the
Company's independent auditors to review the results of the annual audit and to
discuss the financial statements and independence of the auditors. The Audit
Committee recommends to the Board the independent auditors to be retained and
receives and considers the accountants' comments as to controls, adequacy of
staff, and management performance and procedures in connection with the audit
and financial controls. The Audit Committee currently is composed of Messrs.
Hausman, McKenna, and Walker, each of whom the Company believes to be qualified
and "independent" as defined by the Nasdaq National Market listing requirements.
On May 16, 2000, the Board of Directors adopted a written charter for the Audit
Committee in accordance with The Nasdaq Stock Market's rules relating to the
structure and membership on the audit committee of companies whose stock is
traded on Nasdaq. The Company's Audit Committee Charter is attached hereto as
Appendix A.
The Compensation Committee is composed of Mr. Drexler and two outside
directors, Mr. McKenna and Dr. Maydan. The function of the Compensation
Committee, in coordination with the Board of Directors, is to approve the
salaries of executive officers (other than the Chief Executive Officer) and to
approve the salaries of certain other employees. The Stock Option Committee is
composed of two outside directors, Messrs. McKenna and Hausman. The function of
the Stock Option Committee is to oversee the Company's Stock Option Plan and
Employee Stock Purchase Plan.
Director Compensation
Each of the five directors receives a fee of $1,200 per month for serving
as a director, the standard fee in effect since July 1995. The Company also
reimburses reasonable out-of-pocket expenses incurred by directors performing
services for the Company.
The Company's Stock Option Plan provides for the automatic grant of an
option to purchase 15,000 shares of the Company's Common Stock on the date any
person first becomes a director. These grants to newly elected directors have
become exercisable in cumulative increments of one-third (1/3) each at the end
of 24 months, 36 months, and 48 months from the date of grant. The Stock Option
Plan further provides that on the date of the Company's annual meeting, each
non-employee director who has served as a director of the Company for the
preceding six-month period and who is re-elected at the annual meeting, is
automatically granted an option to purchase 6,000 shares of the Company's Common
Stock. The option share grants to the re-elected directors are exercisable in
full at the time of grant. The exercise price for options granted to newly
elected directors and re-elected directors is the fair market value of the
Company's Common
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Stock on the date of grant.
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STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
(As of July 26, 2000)
<TABLE>
<CAPTION>
Director Common Percentage
Name, Principal Occupation, and Other Directorships Age Since Shares of Class
--------------------------------------------------- --- ----- ------ --------
<S> <C> <C> <C> <C>
JEROME DREXLER, Director ................................................... 72 1968 1,185,548(1) 11.7%
Chairman of the Board of Directors and Chief Executive Officer of the
Company and its wholly owned subsidiary, LaserCard Systems Corporation
ARTHUR H. HAUSMAN, Director ................................................ 77 1981 50,392(2) .5%
Private investor. Retired Chairman, President, and Chief Executive Officer
of Ampex Corporation (manufacturer of professional audio-video systems,
data/ memory products, and magnetic tape). Director Emeritus of Technology
for Communications International (high-frequency antenna systems and
electronic reconnaissance systems). Director of California Amplifier, Inc.
(low-noise amplifiers)
DAN MAYDAN, Director ....................................................... 64 1998 17,000(3) .2%
President and Director of Applied Materials, Inc. (semiconductor
manufacturing equipment). Director of Electronics for Imaging, Inc.
(software)
WILLIAM E. McKENNA, Director ............................................... 80 1970 65,483(4) .7%
Private investor. Director of California Amplifier, Inc. (low-noise
amplifiers), Midway Games, Inc. (interactive entertainment software for the
coin-operated and home markets), and WMS Industries, Inc. (coin-operated and
home video and other games)
WALTER F. WALKER, Director ................................................. 45 1999 24,750(5) .3%
President (since 1994) of Seattle SuperSonics National Basketball
Association basketball team, a subsidiary of Ackerley Communications, Inc.
Previously, President (from March to September 1994) of Walker Capital, Inc.
(money management firm) and Vice President (from July 1987 to March 1994) of
Goldman Sachs & Co. (investment banking firm) Director of Redhook Ale
Brewery and Advanced Digital Information Corporation (archival and backup
data-storage peripherals). Trustee of Boys & Girls Clubs of America.
Also a Chartered Financial Analyst (CFA)
RICHARD M. HADDOCK ......................................................... 48 N/A 145,878(6) 1.5%
President and Chief Operating Officer of the Company (since 1997) and its
wholly owned subsidiary, LaserCard Systems Corporation
CHRISTOPHER J. DYBALL ...................................................... 49 N/A 124,420(7) 1.3%
Executive Vice President of the Company; General Manager, Card Manufacturing
STEVEN G. LARSON ........................................................... 50 N/A 86,190(8) .9%
Vice President of Finance and Treasurer of the Company and its wholly owned
subsidiary, LaserCard Systems Corporation
All executive officers and directors as a group (the 8 persons named above) ................... 1,699,661(9) 16.1%
</TABLE>
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(1) Includes 240,600 shares purchasable by exercise of option within 60 days
of July 26, 2000. Does not include 297,100 shares owned by Mr. Drexler's
wife and 16,250 shares held by his wife as custodian, as to all of which
shares Mr. Drexler disclaims any beneficial ownership. Includes 15,000
shares held by The Drexler Foundation, the assets of which are perpetually
dedicated to charity; the power to vote and to dispose of the shares held
by The Drexler Foundation is shared by the Foundation's directors,
consisting of Mr. Drexler and his wife. Mr. Drexler disclaims beneficial
ownership with respect to these shares.
(2) Includes 30,000 shares purchasable by exercise of option within 60 days of
July 26, 2000.
(3) Includes 17,000 shares purchasable by exercise of option within 60 days of
July 26, 2000.
(4) Includes 30,000 shares purchasable by exercise of option within 60 days of
July 26, 2000.
(5) Includes 6,000 shares purchasable by exercise of option within 60 days of
July 26, 2000.
(6) Includes 142,466 shares purchasable by exercise of option within 60 days
of July 26, 2000.
(7) Includes 119,000 shares purchasable by exercise of option within 60 days
of July 26, 2000.
(8) Includes 85,035 shares purchasable by exercise of option within 60 days of
July 26, 2000.
(9) Includes 670,101 shares purchasable by exercise of option within 60 days
of July 26, 2000.
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Required Vote for Approval of Proposal 1
The election of each nominee to the Board of Directors will require the
affirmative vote of the holders of a plurality of the shares of the Company's
Common Stock present in person or represented by proxy at the meeting. The five
nominees for director who receive the most votes cast in their favor will be
elected to serve as directors. With respect to the election of directors,
stockholders may (1) vote "FOR" all five nominees, (2) "WITHHOLD" authority to
vote for all such nominees, or (3) "WITHHOLD" authority to vote for any
individual nominee or nominees, but vote for all other nominees. Because
directors are elected by a plurality of the votes cast, broker non-votes and
shares for which authority to vote has been withheld will have no effect on the
outcome of the election.
On Proposal 1, the Board of Directors recommends a vote FOR election of
the Company's nominees.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 15,000,000 TO 30,000,000 SHARES
Presently, the Company's Certificate of Incorporation authorizes the
issuance of 15,000,000 shares of Common Stock, par value $0.01 per share, and
2,000,000 shares of Preferred Stock, par value $0.01 per share. In May 2000, the
Board of Directors adopted a resolution proposing that Article Fourth of the
Certificate of Incorporation be amended to increase the authorized number of
shares of Common Stock from 15,000,000 to 30,000,000 shares, subject to
stockholder approval of the amendment. The text of paragraph (a) of Article
Fourth, as it is proposed to be amended, is as follows (amended language
underlined):
"(a) Capital Stock. This corporation is authorized to issue two classes of
shares of capital stock to be designated, respectively, "Preferred" stock
and "Common" stock. The total number of shares of capital stock this
corporation is authorized to issue is 32,000,000 shares, of which
2,000,000 shares shall be Preferred Stock and 30,000,000 shall be Common
Stock. The Preferred Stock and Common Stock shall each have a par value of
$0.01 per share."
As of July 26, 2000, the Company had 9,886,303 shares of Common Stock
outstanding and no shares of Preferred Stock outstanding. In addition, there
were approximately 2,152,702 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan and Employee Stock Purchase Plan, including the
proposed increases in shares for these plans as described in this Proxy
Statement. The remaining 2,960,995 shares of authorized but unissued Common
Stock are not reserved for any specific use and are available for future
issuance.
The Board of Directors believes it is desirable to increase the authorized
shares of Common Stock in order to reserve a sufficient number of shares to meet
all known requirements and to provide flexibility in the future for general
corporate purposes such as stock dividends or splits, acquisitions, and
issuances under stock option and other employee incentive programs. The
amendment would provide the Board of Directors with the ability to effect a
stock split in the form of a stock dividend, an action that would be
significantly constrained under the present Certificate of Incorporation.
The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable without further action by the Company's
stockholders, except as may be required by applicable laws or the rules of any
stock exchange or national securities association trading system on which the
securities may be listed or traded. Upon issuance, such shares will have the
same rights as the outstanding shares of Common Stock. The Board of Directors
does not intend to issue any Common Stock except on terms which the Board deems
to be in the best interests of the Company and its then-existing stockholders.
Although the Board of Directors believes that it is in the best interests
of the stockholders for the Board of Directors to have the flexibility to issue
additional shares of Common Stock in any or all of the above circumstances, the
issuance of additional shares of Common Stock could, in certain instances,
discourage an attempt by another person or entity to acquire control of the
Company. The issuance of additional Common Stock, whether or not in connection
with a contest for control, would, in most instances, dilute the voting power of
each stockholder, and may dilute earnings and book value on a per share basis.
The Board of Directors does not recommend this proposed amendment with the
intent to use the ability to issue additional Common Stock to discourage tender
offers or takeover attempts. However, the availability of authorized Common
Stock for issuance could render more difficult or discourage a merger, tender
offer, proxy contest, or other attempt to obtain control of the Company. The
proposed amendment is not in response to any effort on the part of any party to
accumulate material amounts of Common Stock or to acquire control of the Company
by means of merger,
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tender offer, proxy contest, or otherwise, or to change the Company's
management. In addition, the proposal is not part of any plan by management to
recommend a series of similar amendments to the Board of Directors and the
stockholders.
The proposed increase in the number of shares of Common Stock will not
change the number of shares of stock outstanding or the par value of the stock.
Stockholders do not have preemptive rights to acquire the Common Stock
authorized by this amendment. If the amendment is adopted, it will become
effective upon filing a Certificate of Amendment to the Company's Certificate of
Incorporation with the Secretary of State of the State of Delaware. However,
pursuant to Delaware law, the Board of Directors retains the discretion to
abandon and not implement the proposed amendment. The Board of Directors has no
present commitments, plans, or arrangements to issue any of the proposed
additional authorized shares of Common Stock.
Required Vote for Approval of Proposal 2
Approval of the amendment to the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 15,000,000 to
30,000,000 will require the affirmative vote of the holders of a majority of the
outstanding Common Stock entitled to vote at the meeting. Stockholders may (1)
vote "FOR," (2) vote "AGAINST," or (3) "ABSTAIN" from voting on Proposal 2.
Abstentions and broker non-votes are not considered to be votes cast and
therefore will have no effect on the outcome of this proposal.
The Board of Directors recommends a vote FOR approval of Proposal 2.
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
300,000 SHARES
Proposal 3 seeks stockholder approval of an amendment to the Company's
Stock Option Plan (previously called the "1991 Option Stock Plan") to increase
the total number of shares in the Stock Option Plan by 300,000 shares, from
3,150,000 to 3,450,000 shares. The 300,000 share increase represents
approximately 3% of the Company's 9,886,303 total outstanding shares as of the
record date.
In May 2000, the Board of Directors approved, subject to stockholder
approval, an amendment to the Stock Option Plan to increase the aggregate number
of shares available thereunder by 300,000 shares in order to have an adequate
number of shares available for future option grants. As of July 26, 2000, a
total of 1,026,070 shares had been issued upon the previous exercise of options
under the Stock Option Plan and were no longer available for option grants;
1,949,810 of the shares in the Stock Option Plan were reserved for issuance upon
the exercise of currently outstanding options, at prices ranging from $4.69 to
$16.31 per share, or a weighted average per share exercise price of $10.65; and
a total of 174,120 shares remained available for additional option grants, prior
to giving effect to the proposed increase.
The Board of Directors believes that it is in the best interests of the
Company to be able to continue to create equity incentives to assist in
attracting, retaining, and motivating the key employees and consultants of the
Company and its subsidiaries. Although in September 1999, the Company's
stockholders approved an amendment to the Stock Option Plan to increase the
number of shares reserved thereunder by 300,000 shares, the Board of Directors
believes that the 174,120 shares remaining available as of July 26, 2000, for
granting options pursuant to the Stock Option Plan are insufficient for that
purpose.
From March 31, 1991 through July 26, 2000, the following persons or groups
had received options to purchase shares of Common Stock under the Stock Option
Plan as follows: (i) the Chief Executive Officer and the other executive
officers named in the Summary Compensation Table: Mr. Drexler, 347,000 shares,
Mr. Haddock, 373,000 shares, Dr. Dyball, 343,000 shares, and Mr. Larson, 290,000
shares; (ii) all current executive officers of the Company as a group: 1,353,000
shares; (iii) all current directors who are not executive officers as a group:
132,000 shares; (iv) each nominee for director (other than the director listed
in (i) above): Mr. Hausman, 42,000 shares, Dr. Maydan, 27,000 shares, Mr.
McKenna, 42,000 shares, and Mr. Walker, 21,000 shares, and (v) all employees and
consultants of the Company, including any current officers who are not executive
officers, as a group: 1,755,130 shares. The Company cannot now determine the
number of options to be received in the future by all current executive officers
as a group, all current directors who are not also executive officers as a
group, or all employees including any current officers who are not executive
officers as a group.
The following summary of the principal features of the Stock Option Plan
is qualified by reference to the terms of
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the Stock Option Plan, a copy of which is available without charge upon
stockholder request to: J. P. Protsik, Corporate Office, Drexler Technology
Corporation, 1077 Independence Avenue, Mountain View, California 94043.
Summary of Stock Option Plan
The Stock Option Plan provides for the granting to key employees,
officers, directors, and consultants to the Company and its subsidiaries
(approximately 70 persons as of July 26, 2000) of options to purchase shares of
the Company's $0.01 par value Common Stock.
The purpose of the Stock Option Plan is to enhance the interest of the
Company's key employees, officers, directors, and consultants in the success of
the Company by giving them an ownership interest in the Company and to give them
an incentive to continue their service to the Company. The plan also affords a
means of providing additional recognition for services previously rendered. With
the exception of options to be granted to its members, the Stock Option
Committee determines in its sole discretion which of the eligible persons are
granted options and the number of shares subject to such options. Non-statutory
stock options (NSOs) are automatically granted to non-employee directors and
newly elected directors, as more particularly described on page 2 of this Proxy
Statement.
Options granted to employees may be designated as incentive stock options
(ISOs) or as non-statutory stock options (NSOs). Only NSOs may be granted to
consultants. The Internal Revenue Code, as presently in effect, limits the
number of ISOs which can become exercisable by any employee in any one year and
provides that the Company and optionees receive different tax treatment upon
exercise of NSOs and ISOs. No tax consequences result to the Company or an ISO
grantee upon the issuance and exercise of an ISO. No tax consequences result to
the Company or an NSO grantee upon the issuance of an NSO pursuant to the Stock
Option Plan having an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant of the NSO. Upon the exercise of the
NSO, a grantee realizes income in an amount equal to the difference between the
option exercise price and the fair market value of the Company's Common Stock on
the date of exercise of the NSO, and the Company is entitled to a compensation
deduction for the same amount.
ISOs can be exercised only if the optionee is still an employee of the
Company and its subsidiaries, and for a limited time period after termination of
employment (or within one year after the death or disability of the optionee).
All of the presently outstanding options under the Stock Option Plan have
ten-year terms. In general, the options are not immediately exercisable upon
grant, but become exercisable in installments upon the passage of time or the
occurrence of certain events. Options previously granted under the Stock Option
Plan typically become exercisable in installments of one-third (1/3) each after
two, three, and four years from the date of grant; however, it is anticipated
that future option grants typically will become exercisable in installments of
one-fourth (1/4) each after one, two, three, and four years from the date of
grant. One NSO granted in June 1996 becomes exercisable in installments of 20%
each after six, 18, 30, 42, and 54 months from the date of grant. The Stock
Option Plan allows the Board of Directors and/or Stock Option Committee
discretion to modify the terms of outstanding options within certain limits,
including accelerating the vesting of outstanding options, and some options are
immediately exercisable upon grant.
All options granted under the Stock Option Plan must have an exercise
price not less than the fair market value of the Company's Common Stock on the
date the option is granted. Fair market value per share is defined for this
purpose as the average of the high and low trading prices as reported by The
Nasdaq Stock Market on the applicable date. On July 26, 2000, the closing sale
price per share for the Common Stock on The Nasdaq National Market was $14.375.
Payment for the shares upon the exercise of options is in cash or payment by
utilization of outstanding Company stock owned by the optionee, unless payment
by promissory note is directed by the full Board of Directors. The Company
receives no cash consideration upon the granting of options. The number of
shares remaining available in the Stock Option Plan is proportionately adjusted
in the case of a stock split or dividend, as is the number of shares subject to
outstanding options and the exercise price of such options.
The Board of Directors may at any time amend the Stock Option Plan,
provided that no amendment may affect any then outstanding options or any
unexercised portions thereof absent the optionee's consent. Stockholder approval
is required for amendments that materially increase the number of shares
reserved under the Stock Option Plan, materially alter the persons or class of
persons eligible to be granted stock options, and for several types of
amendments related to government codes and regulations. The Board of Directors
may terminate the Stock Option Plan at any time. If not
-7-
<PAGE>
earlier terminated, the Stock Option Plan shall terminate on May 16, 2010.
Termination of the Stock Option Plan will not affect rights and obligations
theretofore granted and then in effect.
In the event of a merger or sale of assets or like event, the Board of
Directors is empowered to make appropriate adjustments to options under the
Stock Option Plan. The Board of Directors has adopted guidelines specifying the
following as adjustments that it would consider appropriate upon the occurrence
of such an event:
o permitting optionees no less than 30 days to exercise the vested portion
of their options;
o having the successor corporation either (a) issue to optionees replacement
options for the unvested portions of options, or else (b) pay deferred
compensation on the spread between the value of Company stock upon the
occurrence of such event and the option exercise price at the time such
unvested portion would have vested; and
o providing for vesting of 100% of the unvested portion for optionees
employed by the Company for at least two years prior to such event if
their employment is terminated within one year of such event by the
successor corporation other than by resignation or for acts of moral
turpitude.
Recent Amendments to Stock Option Plan
In July 2000, under authority provided in the Stock Option Plan, the
Company's Board of Directors adopted amendments to the plan whereby:
o The termination date was changed to May 16, 2010, and the title was
changed to "Stock Option Plan."
o A limit was placed on the number of shares that can be granted to any
person during any twelve month period. This limit was established at
100,000 shares, except that in connection with such person's initial
service to the Company, he or she may be granted options to purchase up to
an additional 100,000 shares. This permits an exclusion from the
nondeductibility of compensation, discussed under "Corporate Tax
Deductibility of Executive Compensation."
Required Vote for Approval of Proposal 3
Approval of the amendment to the Stock Option Plan to increase the number
of shares reserved for issuance thereunder by 300,000 shares will require the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present in person or represented by proxy at the meeting.
Stockholders may (1) vote "FOR," (2) vote "AGAINST," or (3) "ABSTAIN" from
voting on Proposal 3. Abstentions and broker non-votes are not considered to be
votes cast and therefore will have no effect on the outcome of this proposal.
The Board of Directors recommends a vote FOR approval of Proposal 3.
PROPOSAL 4: APPROVAL OF AN AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER BY 100,000 SHARES
Proposal 4 seeks stockholder approval of an amendment to the Company's
Employee Stock Purchase Plan to increase the total number of shares reserved for
issuance thereunder by 100,000 shares, from 228,787 to 328,787 shares. The
100,000 share increase represents approximately 1% of the Company's 9,886,303
total outstanding shares as of the record date.
In May 2000, the Board of Directors approved, subject to stockholder
approval, to amend the Employee Stock Purchase Plan to increase the aggregate
number of shares available thereunder by 100,000 shares, in order to have an
adequate number of shares available for future purchases by employees. As of
July 26, 2000, a total of 28,772 shares remained available for additional
purchases under the Employee Stock Purchase Plan, prior to giving effect to the
proposed increase.
-8-
<PAGE>
The following summary of the principal features of the Employee Stock Purchase
Plan is qualified by reference to the terms of the Plan, a copy of which is
available without charge upon stockholder request to J. P. Protsik, Corporate
Office, Drexler Technology Corporation, 1077 Independence Avenue, Mountain View,
California 94043.
Summary of Employee Stock Purchase Plan
The Employee Stock Purchase Plan was adopted by the Board of Directors and
approved by the Company's stockholders in 1972. The purpose of the Employee
Stock Purchase Plan is to provide eligible employees a convenient means, through
payroll deductions, for acquiring an equity ownership in the Company, and
thereby enhance their sense of participation in Company affairs and provide an
incentive for continued employment.
All regular employees averaging 30 hours or more per week of employment
are eligible to participate in the Employee Stock Purchase Plan after six months
of employment (approximately 80 persons as of July 26, 2000). Enrollment periods
are held each quarter, and participants may designate from 2% to 6% of their
compensation to be withheld for the purchase of shares of Common Stock at 67% of
a trailing average price. The differential between fair market value and the
average price of the shares sold under the Employee Stock Purchase Plan is
charged to Company operations as a compensation expense and is taxed to the
employee as income.
For the 2000 fiscal year ended March 31, 2000, the employees who
participated in the Employee Stock Purchase Plan (including two executive
officers) purchased a total of 16,857 shares, at an average purchase price per
share of $6.06 and a weighted average fair value per share for shares purchased
of $9.63. Company president, Richard M. Haddock, purchased 2,444 shares in
fiscal 2000 for taxable income of $8,526. Christopher J. Dyball, executive vice
president, purchased 2,238 shares in fiscal 2000 for taxable income of $7,726.
The Employee Stock Purchase Plan is administered by the Stock Option
Committee, and, subject to the provisions of the Plan, the Committee has plenary
authority to interpret the Plan and to prescribe, amend, and rescind rules and
regulations relating to it. The Employee Stock Purchase Plan may be terminated
at any time by the Board of Directors.
Required Vote for Approval of Proposal 4
Approval of the amendment to the Employee Stock Purchase Plan to increase
the number of shares reserved for issuance thereunder by 100,000 shares will
require the affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy at the meeting.
Stockholders may (1) vote "FOR," (2) vote "AGAINST," or (3) "ABSTAIN" from
voting on Proposal 4. Abstentions and broker non-votes are not considered to be
votes cast and therefore will have no effect on the outcome of this proposal.
The Board of Directors recommends a vote FOR approval of Proposal 4.
Executive Officers
The following table lists the names and ages of the Company's current
executive officers, the positions held, and the year when first appointed. It is
anticipated that each such executive officer will continue in his position,
although there is no understanding or arrangement to that effect. Any executive
officer could resign or be replaced or removed by the Board of Directors at any
time.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Officer
Name Age Position with Company Since
---- --- --------------------- -----
<S> <C> <C> <C>
Jerome Drexler 72 Chairman of the Board of Directors and Chief Executive Officer 1968
of the Company and its wholly owned subsidiary, LaserCard
Systems Corporation
Richard M. Haddock 48 President and Chief Operating Officer of the Company (since 1997) 1997
and its wholly owned subsidiary, LaserCard Systems Corporation
Christopher J. Dyball 49 Executive Vice President of the Company and General Manager, 1992
Card Manufacturing
Steven G. Larson 50 Vice President of Finance and Treasurer of the Company and 1987
its wholly owned subsidiary, LaserCard Systems Corporation
</TABLE>
-9-
<PAGE>
Executive Compensation
The Summary Compensation Table below discloses the total compensation paid
to each of the Company's four executive officers for the three fiscal years
ended March 31, 2000, for services rendered in all capacities to the Company and
its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Fiscal Shares Underlying
Name and Principal Position Year Salary ($) Bonus ($) Option Grants (#)
---- ---------- --------- -----------------
<S> <C> <C> <C> <C>
Jerome Drexler 2000 $250,786 -- --
Chairman of the Board and 1999 $179,168 -- 65,000
Chief Executive Officer 1998 $164,647 -- 45,000
Richard M. Haddock 2000 $244,476 -- --
President and 1999 $191,931 -- 65,000
Chief Operating Officer 1998 $173,720 -- 20,000
Christopher J. Dyball 2000 $229,840 -- --
Executive Vice President; General 1999 $174,130 -- 65,000
Manager, Card Manufacturing 1998 $150,036 -- 45,000
Steven G. Larson 2000 $180,682 -- --
Vice President of Finance 1999 $154,141 -- 65,000
and Treasurer 1998 $129,662 -- 20,000
</TABLE>
Stock Option Grants to Executive Officers
There were no stock option grants to executive officers during the fiscal
year ended March 31, 2000.
Aggregated Option Exercises and Options Held by Executive Officers
The following table sets forth the value of options exercised by the
Company's executive officers during the fiscal year ended March 31, 2000, and of
options remaining unexercised at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired on Value Fiscal Year-End (#) (2,3) Fiscal Year-End ($)(4)
Exercise Realized ------------------------- ----------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerome Drexler 3,400 $6,375 240,600 -- $1,041,760 $ --
Richard Haddock -- -- 137,466 95,334 $ 620,235 204,500
Christopher Dyball -- -- 114,000 107,000 $ 486,812 253,248
Steven Larson 2,031 $7,410 80,035 95,334 $ 269,122 206,687
</TABLE>
----------
(1) Market value of underlying securities (based on the fair market value of
the Company's Common Stock on The Nasdaq Stock Market) at the time of
their exercise, minus the exercise price.
(2) At the discretion of the Board of Directors and/or Stock Option Committee,
the optionee may pay the exercise price to the Company in cash, by
promissory note, or by delivering already owned shares, subject to certain
conditions.
-10-
<PAGE>
(3) The options have ten-year terms, subject to earlier termination in certain
events.
(4) Market value of securities underlying in-the-money options at fiscal year
end (based on $14.00 per share, the closing market price of the Company's
Common Stock on The Nasdaq Stock Market as of March 31, 2000) minus
exercise price.
Corporate Tax Deductibility of Executive Compensation
The provisions of Section 162(m) of the Internal Revenue Code do not
currently affect any of the Company's executive officers. Section 162(m) imposes
a $1 million annual limit on the amount of compensation deductible by the
Company with respect to each executive officer employed as of the last day of
the applicable year. While the Company will consider deductibility under Section
162(m) with respect to future compensation arrangements with executive officers,
deductibility would not be the sole factor used in ascertaining appropriate
levels or modes of compensation. Since corporate objectives may not always be
consistent with the requirements for full deductibility, it is conceivable that
the Company may enter into compensation arrangements in the future under which
payments would not be deductible under Section 162(m).
Compensation Committee Interlocks and Insider Participation
Jerome Drexler, the Company's Chief Executive Officer, is a member of the
Compensation Committee. The function of the Compensation Committee, in
coordination with the Board of Directors, is to approve the salaries of
executive officers (other than the Chief Executive Officer) and to approve the
salaries of certain other employees.
Employment Contracts, Termination of Employment, and Change of Control
Arrangements
None of the Company's executive officers has employment or severance
arrangements with the Company. Under the terms of the Stock Option Plan, the
Board of Directors and/or Stock Option Committee retains discretion, subject to
certain limits, to modify the terms of outstanding options. In the event of a
merger or sale of assets or like event, the Board of Directors is empowered to
make appropriate adjustments to options under the Stock Option Plan. See the
summary of the Stock Option Plan on pages 6 and 7 of this Proxy Statement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and beneficial owners of more than
10% of the Company's Common Stock to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. The Company typically files these reports on behalf
of its directors and officers, based on information provided by them. The
Company believes, based on its review of Forms 3, 4, and 5, if any,
and periodic written representations from reporting persons, that all officers,
directors, and holders of more than 10% of the Company's Common Stock complied
with all Section 16(a) filing requirements for the 2000 fiscal year.
Principal Stockholders
The table below shows the name, address, number of shares held, nature of
ownership, and percentage of shares held as of July 26, 2000, by the only person
or entity known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock.
<TABLE>
<CAPTION>
Number of Shares and Percent
Name and Address Nature of Ownership of Class
---------------- ------------------- --------
<S> <C> <C>
Jerome Drexler, c/o Drexler Technology Corporation, 1,185,548(1) 11.7%
1077 Independence Avenue, Mountain View, CA 94043 Full dispositive and voting power
</TABLE>
----------
(1) Includes 240,600 shares purchasable by exercise of option within 60 days.
Does not include 297,100 shares owned by Mr. Drexler's wife and 16,250
shares held by his wife as custodian, as to all of which shares Mr.
Drexler disclaims any beneficial ownership. Includes 15,000 shares held by
The Drexler Foundation, the assets of which are perpetually dedicated to
charity; the power to vote and to dispose of the shares held by The
Drexler Foundation is shared by the Foundation's directors,
-11-
<PAGE>
consisting of Mr. Drexler and his wife. Mr. Drexler disclaims beneficial
ownership with respect to these shares.
-12-
<PAGE>
Stock Performance Chart
In the following stock performance chart, the cumulative total return on
investment for the Company's Common Stock over the past five fiscal years is
compared with the Russell 2000 Stock Index ("Russell 2000") and the University
of Chicago Center for Research in Security Prices ("CRSP") Total Return Index
for The Nasdaq Stock Market's Electronic Components industry group ("Nasdaq
Electronic Components"). The Russell 2000 is a benchmark index for small
capitalization stocks. The Nasdaq Electronic Components index is used because
the majority of the Company's revenues currently are derived from the sale of
optical recording media (optical memory cards). The chart assumes that the value
of the investment in the Company and each index was $100 on March 31, 1995, and
that any dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
*Total Return Assumes Reinvestment of Dividends.
Assumes $100 Invested on March 31, 2000
[STOCK PERFORMANCE CHART
APPEARS HERE]
The stock performance chart was plotted using the following data:
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Drexler Technology Corporation .... $ 100.00 $ 206.38 $ 174.47 $ 265.96 $ 170.21 $ 238.30
Russell 2000 ...................... $ 100.00 $ 129.04 $ 135.63 $ 192.62 $ 161.31 $ 221.46
CRSP Nasdaq Electronic Components . $ 100.00 $ 131.62 $ 231.17 $ 264.62 $ 385.88 $1,141.41
</TABLE>
PAST RESULTS ARE NOT AN INDICATOR OF FUTURE INVESTMENT RETURNS
Availability of Form 10-K
The Company will mail without charge a copy of the Company's Report on
Form 10-K for the fiscal year ended March 31, 2000, including the financial
statements, schedules, and list of exhibits. Send requests to: J. P. Protsik,
Corporate Office, Drexler Technology Corporation, 1077 Independence Avenue,
Mountain View, California 94043.
-13-
<PAGE>
Compensation Committee Report
The Board of Directors, in coordination with the Compensation Committee
and Stock Option Committee, establishes the general compensation policies of the
Company and specific compensation levels for the Company's Chief Executive
Officer and other executive officers. The Company's compensation policy is
intended to provide total compensation opportunities that are competitive with
the pay practices of other companies and thereby enable the Company to attract
and retain superior performing managers. This is accomplished through a
combination of cash incentives and equity incentives which are granted to the
Company's executive officers as well as to a broad range of the Company's
employees. The Company believes that this closely aligns employee interests with
those of its stockholders.
The Board considered a total package for the Company's Chief Executive
Officer in the context of the Company's objectives and business strategy. The
analysis included reviewing compensation of chief executive officers of
comparable companies within similar industries. The Company's overall financial
performance for fiscal 2000 was considered by the Board in evaluating the Chief
Executive Officer's compensation; however, the specific performance of the
Company's Common Stock was not a factor. In addition, the Board considered
factors such as the individual's past performance and future potential. The same
factors and considerations that were used in evaluating the compensation of the
Chief Executive Officer were used in evaluating the compensation of the
Company's other executive officers.
The Company also maintains a Management Bonus Plan for its management
employees. The Board determines the Company contribution to a bonus pool. This
contribution is usually related to performance criteria such as pre-tax,
pre-bonus Company earnings and licensing revenues, with various adjustments. The
Chief Executive Officer then has sole discretion to allocate this bonus pool
among the employees of the Company, excluding himself. The Company made no
contribution to the bonus pool during fiscal 1998, 1999, or 2000.
Compensation Committee Stock Option Committee
---------------------- ----------------------
Jerome Drexler, Dan Maydan, Arthur H. Hausman, William E. McKenna
William E. McKenna
Independent Public Accountants
Arthur Andersen LLP are the Company's independent public accountants for
the current fiscal year and first held this position for the fiscal year ended
March 27, 1981. The independent public accountants are appointed by the Board of
Directors. During the fiscal year ended March 31, 2000, Arthur Andersen LLP
performed audit services including examination of annual financial statements,
assisted on accounting and financial reporting matters, and performed tax
services including the preparation of returns and the rendering of planning
advice. Representatives of Arthur Andersen LLP are expected to be present at the
stockholders' meeting. The representatives will have an opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions by stockholders.
Proxy Cost and Solicitation
Proxies may be solicited by mail, in person, by telephone, or by other
methods. Solicitations may be made by directors, officers, and employees of the
Company, none of whom will receive additional compensation for such
solicitations. The Company will request banks, brokerage houses, and other
custodians, nominees, and fiduciaries to forward all of its solicitation
materials to the beneficial owners of the shares of Common Stock they hold of
record. The Company will reimburse these record holders for clerical and mailing
expenses incurred by them in forwarding these materials to their customers.
The Company has retained Corporate Investor Communications, Inc. ("CIC")
for solicitation and advisory services, if necessary, in connection with the
solicitation, for which CIC would receive a fee estimated at $5,000, together
with reimbursement for its reasonable out-of-pocket expenses. The cost of
soliciting proxies on behalf of the Board of Directors for the annual meeting is
being borne by the Company. Costs incidental to these solicitations include
expenditures for printing, postage, legal, soliciting, and related expenses and
could include accounting and other consulting services in addition to the fees
and costs of CIC described above.
Stockholder Proposals for the 2001 Annual Meeting
In accordance with the Securities and Exchange Commission's regulations,
stockholder proposals intended to be considered for inclusion in the proxy
statement for the 2001 Annual Meeting must be received by the Secretary of the
Company at the Company's principal executive offices at 1077 Independence
Avenue, Mountain View, California 94043,
-14-
<PAGE>
no later than April 20, 2001.
Other Matters; Timely Proposals
The Company's management does not intend to bring any business before the
meeting other than the matters referred to in the accompanying Notice. However,
if any other matters are properly presented at the meeting, all proxies
solicited hereby will be voted in accordance with the discretion of the proxy
holders. The proxy holders will be deemed to have discretionary authority to
vote on the following matters, among others: (a) all stockholder proposals, (b)
approval of the minutes of the 1999 Annual Meeting (but without ratification of
the actions taken at that meeting); (c) election of a substitute for any nominee
who is unable or for good cause will not serve as a director of the Company; and
(d) all matters incident to the conduct of the meeting.
A stockholder proposal not included in the Company's proxy statement for
the 2001 Annual Meeting will be ineligible for presentation at the meeting
unless the stockholder gives timely notice of the proposal in writing to the
Secretary of the Company at the principal executive offices of the Company and
otherwise complies with the provisions of the Company's By-Laws. In accordance
with Section 2.13(c) of the Company's By-Laws, to be timely submitted for the
2001 Annual Meeting, the Company must have received the stockholder's notice not
less than 120 days prior to the meeting; however, if less than 120 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the tenth day following the day on which notice of the date of the meeting
is mailed to stockholders or public disclosure of the date of the meeting
occurs. Public disclosure of the date of the meeting is deemed to have occurred
if the annual meeting is held on the meeting date specified in the Company's
By-Laws. Therefore, if the 2001 Annual Meeting occurs on September 21, 2001, to
be timely, the stock holder's notice must be received by the Company no later
than May 24, 2001.
APPENDIX A
AUDIT COMMITTEE CHARTER ADOPTED MAY 16, 2000
1. Responsibility. The Audit Committee is generally responsible for
overseeing and monitoring the participation of both management and the
independent accountants in the Company's financial reporting process. The
independent accountants shall be accountable to the Committee and ultimately to
the Board of Directors. The Committee shall evaluate the independent accountants
and based thereon recommend the selection and, where appropriate, replacement of
the independent accountants, such actions being ultimately the responsibility of
the Board of Directors.
2. Membership. The Audit Committee shall consist of three directors, each
of which (i) has no relationship with the Company that would, in the opinion of
the Board of Directors, interfere with the exercise of independent judgment in
carrying out the responsibilities of a director, and each of which is otherwise
an "independent director" as defined in Rule 4200(a)(15) of the NASD listing
standards, as it may be modified or supplemented, and (ii) has demonstrated the
ability to read and understand fundamental financial statements, including
balance sheet, income statement, and cash flow statement. In addition, at least
one member shall have had past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer, or other senior officer with financial oversight
responsibilities.
3. Independence of Accountants. The Audit Committee shall receive the
written disclosures and the letter from the independent accountants required by
Independent Standards Board Standard No. 1, as it may be modified or
supplemented, shall discuss with the independent accountants the independent
accountants' independence in view of any disclosed relationships or services
that may impact the objectivity and independence of the independent accountants,
and shall recommend to the full Board any appropriate action that may be
required to ensure the independence of the independent accountants.
4. Review of Audit Procedures. The Audit Committee shall discuss with the
independent accountants the matters required to be discussed by SAS 61, as it
may be modified or supplemented. The Committee shall also review and approve the
budget for the services performed by the independent accountants and shall
monitor the performance to budget.
5. Financial Statements. The Audit Committee shall review and discuss the
audited financial statements with management and with the independent
accountants. Based upon this review and discussion and upon the review and
-15-
<PAGE>
discussions referred to in Sections 3 and 4 of this charter, the Committee shall
determine whether to recommend to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the last fiscal year for filing with the Securities and Exchange Commission.
-16-
<PAGE>
ATTACHMENT A
(FOR SEC REFERENCE ONLY)
--------------------------------------------------------------------------------
PROXY
[LOGO] DREXLER
Technology Corporation
This Proxy Is Solicited On Behalf Of The Board Of Directors
For The Annual Meeting September 22, 2000
The undersigned hereby appoints Jerome Drexler and Jerald E. Rosenblum, 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 on the reverse
side, all the shares of Common Stock of Drexler Technology Corporation held of
record by the undersigned on Wednesday, July 26, 2000, at the Annual Meeting of
Stockholders to be held at Hyatt Rickeys of Palo Alto, 4219 El Camino Real, Palo
Alto, California, on Friday, September 22, 2000, at 2 p.m. or any continuation
or adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE
ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS.
YOU MAY REVOKE THIS PROXY AT ANY TIME
PRIOR TO ITS EXERCISE, OR YOU MAY
ATTEND THE MEETING AND VOTE IN PERSON.
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
Please mark
your votes as
indicated in |X|
this example
<S> <C> <C> <C> <C> <C> <C>
WITHHELD
ITEM 1. - ELECTION OF DIRECTORS. FOR FOR ALL ITEM 2. - Amendment to the Certificate of FOR AGAINST ABSTAIN
|_| |_| Incorporation to increase the number of shares |_| |_| |_|
Nominees: Jerome Drexler of Common Stock authorized for issuance from
Arthur H. Hausman 15,000,000 shares to 30,000,000 shares.
Dan Maydan
William E. McKenna ITEM 3. - Amendment to the Stock Option Plan to FOR AGAINST ABSTAIN
Walter F. Walker increase the number of shares reserved for |_| |_| |_|
issuance thereunder by 300,000 shares.
WITHELD FOR: (Write that nominee's name on
the space provided below): ITEM 4. - Amendment to the Employee Stock Purchase FOR AGAINST ABSTAIN
Plan to increase the number of shares reserved |_| |_| |_|
__________________________________________ for issuance thereunder by 100,000 shares.
ITEM 5. - OTHER MATTERS. In their discretion, the
Proxies are authorized to vote upon such other
matters as may properly come before the meeting
or any adjournment for continuation thereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF THIS PROXY IS SIGNED AND RETURNED
WITHOUT VOTING INSTRUCTIONS, THE SHARES WILL BE
VOTED FOR ELECTION OF DIRECTORS, FOR PROPOSALS 2,
3, AND 4, AND ACCORDING TO THE DISCRETION OF THE
PROXY HOLDERS(S) ON ANY OTHER MATTERS THAT
PROPERLY COME BEFORE THE MEETING. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE ABOVE
PROPOSALS.
Signature(s) ____________________________________________________________________________ Date _____________________________, 2000
Please sign exactly as your name appears above. When shares are held by joint tenants, both should sign. When signing as attorney,
as executor, administrator, trustee or guardian, please give the full title as such. If a corporation, please sign in full corporate
name by the president or other authorized officer. If a partnership, please sign the partnership name by the authorized person.
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</TABLE>
^ FOLD AND DETACH HERE ^
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE MARK, SIGN, DATE, AND RETURN
THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
THANK YOU.
<PAGE>
ATTACHMENT B
(FOR SEC REFERENCE ONLY)
DREXLER TECHNOLOGY CORPORATION
STOCK OPTION PLAN
Amended and Restated as of July 26, 2000
(Including an Amendment Subject to Stockholder Approval
On September 22, 2000, to Increase Shares Reserved for Issuance by
300,000 Shares)
1. PURPOSES. Drexler Technology Corporation (hereinafter called the
"Company") has adopted this Stock Option Plan (this "Plan") to enhance the
concern of the Company's key employees, officers, directors, and consultants in
the success of the Company by giving them an ownership interest in the Company,
and to give them an incentive to continue their service to the Company.
2. STOCK SUBJECT TO PLAN. The Company shall reserve 3,450,000 shares of
its $0.01 par value Common Stock (hereinafter called the "Shares") to be issued
upon exercise of the options which may be granted from time to time under this
Plan. As it may from time to time determine, the Board of Directors of the
Company (hereinafter called the "Board") may authorize that the Shares may be
comprised, in whole or in part, of authorized but unissued shares of the Common
Stock of the Company or of issued shares which have been reacquired. If options
granted under this Plan terminate or expire before being exercised in whole or
in part, the Shares subject to those options which have not been issued may be
subjected to subsequent options granted under this Plan.
The number of shares covered by options granted to any person during any
twelve month period shall not exceed 100,000 shares, subject to adjustment in
accordance with Section 5a. However, in connection with such person's initial
service to the Company, he or she may be granted options to purchase up to an
additional 100,000 shares.
3. ADMINISTRATION OF THIS PLAN. The Board shall appoint a Stock Option
Committee (hereinafter called the "Committee") to administer this Plan which
Committee shall consist of not less than two (2) members of the Board, each of
whom shall be a "Non-Employee Director" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. Subject to the express provisions
of this Plan and guidelines which may be adopted from time to time by the Board,
the Committee shall have plenary authority in its discretion (a) to determine
the individuals to whom, and the time at which, options are granted, and the
number and purchase price of the Shares subject to each option; (b) to determine
whether the options granted shall be "incentive stock options" within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended
(hereinafter called the "Code"), or non-statutory stock options, or both; (c) to
interpret this Plan and prescribe, amend, and rescind rules and regulations
relating to it; (d) to determine the terms and provisions (and amendments
thereof) of the respective option agreements subject to Section 6 of this Plan,
which need not be identical, including, if the Committee shall determine that a
particular option is to be an incentive stock option, such terms and provisions
(and amendments thereof) as the Committee deems necessary to provide for an
incentive stock option or to conform to any change in any law, regulation,
ruling or interpretation applicable to incentive stock options; and (e) to make
any and all determinations which the Committee deems necessary or advisable in
administering this Plan. The Committee's determination on the foregoing matters
shall be conclusive. The Committee may delegate any of the foregoing authority
to the Chief Executive Officer with respect to options granted to or which are
held by persons who are neither officers nor directors of the Company.
4. PERSONS ELIGIBLE. The Committee may grant incentive stock options to
key employees of the Company or its subsidiaries (including officers and
directors) and non-statutory stock options to key employees or consultants
(including officers and directors) of the Company or its subsidiaries. For this
purpose, "employee" shall conform to the requirements of Section 422A of the
Code, and "subsidiary" means subsidiary corporations as defined in Section 425
of the Code.
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<PAGE>
The aggregate fair market value (determined as of the time the option is
granted) of the Shares with respect to which incentive stock options are
exercisable by an optionee for the first time during any calendar year (under
all incentive stock option plans of the Company or its parent or subsidiaries)
shall not exceed $100,000.
5. CHANGES IN CAPITAL STRUCTURE.
a. Effect on this Plan. In the event of changes in the outstanding
capital stock of the Company by reason of any stock dividend, stock split or
reverse split, reclassification, recapitalization, merger or consolidation,
acquisition of 80% or more of its gross assets or stock, reorganization or
liquidation, the Committee and/or the Board shall make such adjustments in the
aggregate number and class of shares available under this Plan as it deems
appropriate, and such determination shall be final, binding, and conclusive.
b. In Outstanding Options. Should a stock dividend, stock split,
reverse stock split, reclassification, or recapitalization occur, then the
Committee and/or the Board shall make such adjustments in (i) the number and
class of shares to which optionees will thereafter be entitled upon exercise of
their options and (ii) the price which optionees shall be required to pay upon
such exercise as it in its sole discretion in good faith deems appropriate, and
such determination shall be final, binding, and conclusive. Notwithstanding the
foregoing, such adjustment shall have the result that an optionee exercising an
option subsequent to such occurrence would pay the same aggregate exercise price
to exercise the entire option and would then hold the same class and aggregate
number of shares as if such optionee would have exercised the outstanding option
immediately prior to such occurrence.
c. In the event of any merger or consolidation of the Company
(except with a subsidiary) or any acquisition of 80% or more of its gross assets
or stock, or any reorganization or liquidation of the Company (an "Event"), the
Board shall make arrangements (the "Arrangements") which shall be binding upon
the holders of unexpired options then outstanding under this Plan as the Board,
in its sole discretion, in good faith determines to be in the best interests of
the Company, which determination shall be final, binding, and conclusive. The
possible Arrangements include, but are not limited to, the substitution of new
options for any portion of such unexpired options, the assumption of any portion
of such unexpired options by any successor to the Company, the acceleration of
the expiration date of any portion of such unexpired options to a date not
earlier than thirty (30) days after notice to the optionee, or the cancellation
of such portion in exchange for the payment by any successor to the Corporation
of deferred compensation to the optionee, in an amount equal to the difference
between the fair market value of the Shares subject to such unexpired portion
and the aggregate exercise price of the Shares under the terms of such unexpired
portion on the date of the Event, in installments which correspond to the
vesting schedule of the unexpired option. The Board shall not be obligated to
arrange such substitution or assumption to comply with Section 425(a) of the
Code or to accelerate the exercisability of a portion of an option when it
accelerates the expiration date of such portion. The Board or Committee may from
time to time issue guidelines as to what Arrangements it deems appropriate
should an Event occur. The guidelines currently issued by the Board of Directors
are attached hereto as Attachment A. These guidelines may be changed at any time
without notice. Accordingly, optionees have no vested right with respect to the
Arrangements which may be made upon the occurrence of an Event.
6. TERMS AND CONDITIONS OF OPTIONS. Each option granted under this Plan
shall be evidenced by a stock option agreement (hereinafter called "Agreement")
which is not inconsistent with this Plan, and the form of which the Committee
and/or Board may from time to time determine, provided that the Agreement shall
contain the substance of the following:
a. Option Price. The option price shall be not less than 100% of the
fair market value of the Shares at the time the option is granted, which shall
be the date the Committee and/or Board, or its delegate, awards the grant. If
the optionee, at the time the option is granted, owns stock possessing more than
10% of the total combined voting power of all the classes of stock of the
Company or of its parent or subsidiaries (a "Principal Shareholder"), the option
price of incentive stock options granted such Principal Shareholder shall be not
less than 110% of the fair market value of the Shares at the time the option is
granted. The fair market value of the Shares shall be determined and the option
price of the Shares set by the Committee and/or Board or its delegate in
accordance with the valuation methods described in Section 20.2031-2 of the
Treasury Regulations.
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<PAGE>
b. Method of Exercise. At the time of purchase, Shares purchased
under options shall be paid for in full either (i) in cash, (ii) at the
discretion of the Board, with a promissory note secured by the Shares purchased,
(iii) at the discretion of the Committee and/or Board, with outstanding stock of
the Company at such value as the Board shall determine in its sole discretion to
be the fair market value of such stock on the date of exercise in accordance
with the valuation methods discussed in Section 20.2031-2 of the Treasury
Regulations, or (iv) a combination of promissory note (if permitted pursuant to
(ii) above), stock (if permitted pursuant to (iii) above), and/or cash. If
outstanding stock is used as payment and such stock was acquired upon prior
exercise of an option granted under this Plan, then such stock must have been
held by the optionee for at least one year subsequent to such prior exercise and
two years subsequent to the grant of the prior exercised option. To the extent
that the right to purchase Shares has accrued under an option, the optionee may
exercise said option from time to time by giving written notice to the Company
stating the number of Shares with respect to which the optionee is exercising
the option, and submitting with said notice payment of the full purchase price
of said Shares either in cash or, at the discretion of the Board and/or
Committee as described above, with a promissory note, outstanding stock of the
Company, or a combination of cash, promissory note, and/or such stock. As soon
as practicable after receiving such notice and payment, the Company shall issue,
without transfer or issue tax to the optionee (or other person entitled to
exercise the option), and at the main office of the Company or such other place
as shall be mutually acceptable, a certificate or certificates representing such
Shares out of authorized but unissued Shares or reacquired Shares of its capital
stock, as the Board and/or Committee, or its delegate, may elect, for the number
of Shares to be delivered. The time of such delivery may be postponed by the
Company for such period as may be required for it with reasonable diligence to
comply with such procedures as may, in the opinion of counsel to the Company, be
desirable in view of federal and state laws, including corporate securities laws
and revenue and taxation laws. If the optionee (or other person entitled to
exercise the option) fails to accept delivery of any or all of the number of
Shares specified in such notice upon tender of delivery of the certificates
representing them, the right to exercise the option with respect to such
undelivered Shares may be terminated.
c. Option Term. The Committee and/or Board or its delegate may grant
options for any term, but shall not grant any options for a term longer than ten
(10) years from the date the option is granted (except in the case of an
incentive stock option granted to a Principal Shareholder in which case the term
shall be no longer than five (5) years from the date the option is granted).
Each option shall be subject to earlier termination as provided in this Section
6 of this Plan.
d. Exercise of Options. Each option granted under this Plan shall be
exercisable on such date or dates, upon or after the occurrence of certain
events, or upon or after the achievement of certain performance milestones
(which dates may be accelerated or which occurrences or achievements may be
waived in whole or in part or extended at the discretion of the Committee and/or
Board or its delegate) and during such period and for such number of Shares as
shall be determined by the Committee and/or Board or its delegate. An incentive
option granted to a non-officer may not be exercised at any time unless the
optionee shall have continuously served, to the extent determined by the
Committee and/or Board or its delegate, as an employee of the Company or its
subsidiary throughout a period commencing at the date an option is granted and
ending no more than three (3) months and no less than thirty (30) days before an
attempted exercise of the option, and, if applicable, unless the Committee
and/or Board or its delegate shall determine and notify the optionee in writing
that certain events have occurred or certain performance milestones have been
achieved.
e. Nonassignability of Option Rights. No option shall be assignable
or transferable by the optionee except by will or by the laws of descent and
distribution. During the life of an optionee, the option shall be exercisable
only by the optionee.
f. Effect of Termination of Employment or Death or Disability. In
the event the optionee's employment with the Company and/or its subsidiaries
ceases, as determined by the Committee, during the optionee's lifetime for any
reason, including retirement, any incentive option or unexercised portion
thereof granted to a non-officer optionee which is otherwise exercisable shall
terminate unless exercised within a period not to exceed three (3) months nor to
be less than thirty (30) days of the date on which such employment ceased but
not later than the date of expiration of the option period. In the event of the
death or disability (as defined in Code Section 22(e)(3)) of the optionee while
employed or within a period not to exceed three months nor to be less than
thirty (30) days of the date on which such employment ceases, any option or
unexercised portion thereof granted to the optionee, if
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<PAGE>
otherwise exercisable by the optionee at the date of death or disability, may be
exercised by the optionee (or by the optionee's personal representatives, heirs
or legatees) at any time prior to the expiration of one year from the date of
death or disability of the optionee but not later than ten (10) years from the
date of grant of such option except that, in the case of an incentive option
granted to a Principal Shareholder, not later than five (5) years from the date
of grant of such option.
g. Rights of Optionee. The optionees shall have no rights as a
stockholder with respect to any Shares subject to an option until the date of
issuance of a stock certificate to the optionee for such Shares. No adjustment
shall be made for dividends or other rights of which the record date is prior to
the date such stock certificate is issued. Neither this Plan, nor any action or
agreement thereunder, shall confer any rights of employment, any rights to
election or retention as an officer or director, or any rights to serve as a
consultant.
7. USE OF PROCEEDS. The proceeds from the sale of stock pursuant to
options granted under this Plan shall constitute general funds of the Company.
8. AMENDMENT OF PLAN. The Board of Directors may at any time amend this
Plan, provided that no amendment may affect any then outstanding options or any
unexercised portions thereof absent the optionee's consent, and provided further
that any such amendment materially increasing the number of Shares reserved
under this Plan, materially altering the persons or class of persons eligible to
be granted stock options under this Plan, causing options granted to employees
and intended to be incentive options under this Plan not to qualify as
"incentive stock options" under Section 422A of the Code, or amending this
Section 8 shall be subject to shareholder approval. Any amendment to this Plan
which would cause the acquisition or disposition of an option granted under this
Plan by an officer or director of the Company not to be exempt from the
operation of Section 16(b) of the Securities Exchange Act of 1934 pursuant to
rules and regulations promulgated pursuant to such Section, case law or SEC
releases or no-action letters interpreting such Section, or new Federal statute
or amendments to such Section, shall also be subject to shareholder approval.
9. EFFECTIVE DATE AND TERMINATION OF PLAN. This Plan was adopted by the
Board of Directors on November 30, 1990, and was approved by the shareholders on
March 1, 1991. This Plan has been amended from time as permitted hereunder, most
recently on July 6, 2000. The Board may terminate this Plan at any time. If not
earlier terminated, this Plan shall terminate May 16, 2010. Termination of this
Plan will not affect rights and obligations theretofore granted and then in
effect.
This Plan, the granting of any option hereunder, and the issuance of
stock upon the exercise of any option, shall be subject to such approval or
other conditions as may be required or imposed by any regulatory authority
having jurisdiction to issue regulations or rules with respect thereto,
including the securities laws of various governmental entities.
10. AUTOMATIC OPTION GRANTS TO DIRECTORS. Subject to registration and
qualification under federal and state securities laws as is advised by counsel,
the Company's current and future directors are hereby granted options under this
Plan as follows: (i) on the date of the Company's Annual Meeting of
Stockholders, each of the Company's Non-Employee Directors (as defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended, but whether or not
such director serves as a member of the Stock Option Committee), who is
re-elected at such meeting to another term as a director, and who has served the
Company as a director for the immediately preceding six-month period, shall
automatically and without any further action by the Board be granted a
Non-Statutory Stock Option to purchase 6,000 shares of the Company's Common
Stock; and (ii) on the date any person first becomes a director, whether through
election by the Company's shareholders or appointment by the Board of Directors
to fill a vacancy, each such person shall automatically and without further
action by the Board be granted a Non-Statutory Stock Option to purchase 15,000
shares of the Company's Common Stock.
The exercise price for such options shall be equal to the trading
price for the Company's stock on the date of grant in the over-the counter
market calculated pursuant to subparagraphs (b) and (c) of Section 20.2031-2 of
the Treasury Regulations. The date of grant of an option shall, for all
purposes, be the date determined in accordance with the terms of this Section
10. The foregoing options shall be for a term of five years and are to be
exercisable as follows: (i) the 6,000 option share grants to re-elected
directors shall be immediately exercisable in full, and
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<PAGE>
(ii) the 15,000 option share grants to newly elected or appointed directors
shall be exercisable in cumulative increments of one-third each at the end of 24
months, 36 months, and 48 months if the optionee is still a director of the
Company or its subsidiaries. Upon the occurrence of an event described in
Section 5(b) of this Plan, the number of option shares which a director shall be
granted pursuant to the foregoing formula, and the class of stock which is the
subject of such option grant, shall be automatically adjusted such that
directors receiving an automatic option grant subsequent to the occurrence of
such event shall receive the same aggregate number of option shares, and would
then hold the same class of stock, as if such director had been granted the
option prior to the occurrence of such event.
In the event an automatic option grant(s) pursuant to this Section
10 would result in option shares having been granted in excess of the number of
option shares then remaining available for grant under this Plan, then such
option grant(s) shall be made contingent upon a proper amendment to this Plan to
accommodate such grants.
Notwithstanding Section 8 of this Plan, the foregoing automatic
option grant formula may not be amended more than once every six months, other
than to comport with changes to the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
11. LIMITED AUTHORITY TO ALTER TERMS OF OPTIONS. Within the parameters of
Section 6 of this Plan, the Board of Directors may, at their discretion, alter
the terms of options to be granted pursuant to Section 10 hereof, or which were
previously granted pursuant to Section 10 hereof.
Rev. Stock Purchase Plan
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<PAGE>
ATTACHMENT C
FOR SEC REFERENCE ONLY
DREXLER TECHNOLOGY CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Amended and Restated as of July 26, 2000
(Including an Amendment Subject to Stockholder Approval
On September 22, 2000, to Increase Shares Reserved for Issuance by
100,000 Shares)
1. Purpose. The purpose of this Plan is to provide eligible employees a
convenient means for acquiring an equity ownership in the Company, and thereby
enhance their sense of participation in Company affairs and provide an incentive
for continued employment.
2. Administration. The Plan shall be administered by the existing Stock
Option Committee, consisting of not less than two members of the Board of
Directors. Subject to the provisions of the Plan, the Committee shall have
plenary authority to interpret the Plan and to prescribe, amend and rescind
rules and regulations relating to it. All costs and expenses incurred in the
administration of the Plan will be paid by the Company.
3. Eligible Employees. All employees who are employed an average of not
less than thirty (30) hours per week by the Company and its subsidiaries are
eligible to participate in the Plan commencing on the first enrollment date
following the completion of six months of continuous such employment.
4. Enrollment. Quarterly enrollment dates for the Plan shall be
established by the Stock Option Committee. An eligible employee may enroll in
the Plan on any enrollment date, by signing a form provided by the Company for
authorizing payroll deductions for contributions to the Plan.
5. Contributions. Each eligible employee electing to enroll in the Plan
shall, upon enrollment, designate (on the form provided by the Company) a
percentage of between two percent (2%) and six percent (6%) of his straight time
pay plus, at the employee's election, any bonus pay to be withheld as a
contribution by payroll deduction. Such percentage can be changed, within the
limits stated, on any subsequent enrollment date by appropriate designation on
the form provided by the Company. The amount of each employee's contribution
shall be held by the Company in a special account on the books of the Company,
and such contributions, free of any obligation to pay interest thereon, will be
credited by the Company to such employee's account as soon as practicable after
each withholding.
6. Purchase of Shares. Semiannually, as soon as practicable after
alternate enrollment dates as established by the Committee, the Company will
apply the contributions accumulated in each employee's account as of said
enrollment date to the purchase of full shares of its Common Stock. The number
of shares to be purchased shall be determined by dividing the amount of said
accumulated contributions by an amount equal to sixty-seven percent (67%) of the
lower of:
a. the average of the Trading Prices on the last day of each of the
three fiscal months next preceding the next enrollment date; or
b. the average of the Trading Prices on the three Trading Days
immediately preceding the next enrollment date; or
c. the average of the Closing Prices on the last day of each of the
three fiscal months preceding the next enrollment date; or
d. the average of the Closing Prices on the three Trading Days
immediately preceding the next enrollment date.
For this purpose, "Trading Day" is defined as a day on which quoted sales of the
Company's Common Stock
1
<PAGE>
occurred and "Trading Price" is defined as the mean between the highest and
lowest trading prices of the Company's Common Stock on the Trading Day, and
"Closing Price" is defined as closing trade price of such stock on that day. The
Company will, as soon as practicable after the purchase date, issue to the
employee entitled thereto a certificate evidencing the shares issuable to him as
provided in the Plan. Any amount remaining in an employee's account which is
less than the sum required to purchase a full share of Common Stock will be held
in said employee's account to add to the employee's subsequent contributions.
7. Withdrawals and Termination. An employee may withdraw the funds
contributed by him to the Plan at any time prior to the use of the funds for the
purchase of the Common Stock of the Company, in which case he shall not be
eligible for further participation until the next enrollment date and only upon
his signing a new payroll deduction authorization form.
An employee's participation in the Plan shall terminate when his
employment with the Company or a subsidiary terminates for any reason. The
amount accumulated in his account at such termination shall be allowed to remain
in his account until the next purchase date in which event the shares purchased
at said date, together with any amount less than that required to purchase a
full share of Common Stock, shall be delivered to him or to the executor or
administrator of his estate, as the case may be, unless such employee, or such
executor or administrator, shall elect by written notice to the Company to have
said accumulated amount refunded.
8. Assignment. No right or interest of any employee in the Plan or in an
employee's account is assignable or transferable, voluntarily, involuntarily, or
by operation of law, except by will or by the laws of descent and distribution.
An employee's account shall not be subject to execution, attachment, or similar
process.
9. Reserved Shares. An aggregate of 328,787 shares of the Company's $0.01
par value Common Stock shall be reserved for issuance under this Plan, which
shares may be in whole or in part, as the Board of Directors shall from time to
time determine, authorized but unissued shares or issued shares reacquired by
the Company. Said amount may be increased by the Board of Directors when
necessary for the continued operation of the Plan, subject to the approval of
the stockholders no later than the annual meeting following such increase.
10. Effective Date and Termination of Plan. This Plan is a continuation of
the plan originally adopted by the Board of Directors on May 31, 1972. The Plan
was amended on July 6, 2000, to increase the number of shares reserved for
issuance under the Plan by 100,000 shares, subject to stockholder approval.
The Plan may be terminated at any time by the Board of Directors. In
the event any increase in reserved shares necessary for continued operation of
the Plan fails to receive the required stockholder approval, or in the event the
Plan is terminated by the Board of Directors, all funds contributed to the Plan
which have not been used to purchase stock under the Plan shall be returned to
the employees contributing same.
11. Adjustments Upon Changes in Capital Structure. If a stock dividend,
stock split or reverse stock split, reclassification or recapitalization were to
occur, then the aggregate number of shares of the Company's Common Stock
reserved for issuance under the Plan shall be appropriately adjusted by the
Committee in accordance with the Plan and such adjustment shall be conclusive.
In the event of any merger or consolidation of the Company (except
with a subsidiary) with or into another corporation in which the Company is not
the surviving corporation or any acquisition of 80% or more of its gross assets
or stock, then the Board of Directors shall make arrangements at its discretion
for either (i) the termination of the Plan, in which case all funds contributed
to the Plan which have not been used to purchase stock under the Plan shall be
returned to the employees contributing same, or (ii) upon notice to the
participating employees, the acceleration of the application of contributions
accumulated in each employee's account to the purchase of full shares of the
Company's Common Stock pursuant to Section 6 prior to such transaction.
Rev. Employee Stock Purchase Plan
2
