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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Perceptronics ,Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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PERCEPTRONICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1999
----------------
To The Stockholders:
The Annual Meeting of Stockholders of Perceptronics, Inc. (the
"Company") will be held at the Company's offices located at 21010 Erwin
Street, Woodland Hills, California, on September 14, 1999, at 10:00 a.m. for
the following purposes:
1. To elect six directors to serve until the next Annual Meeting
of Stockholders or until their successors are duly elected and
qualified. The Board of Directors' nominees are Dr. Gershon
Weltman, Steven P. Corda, Dr. Amos Freedy, Dr. John Lyman,
Robert Parker and Stanley B. Schneider;
2. To approve the 1999 Stock Option Plan for employees,
consultants and advisors;
3. To approve the 1999 Stock Option Plan for Non-Employee
Directors; and
4. To transact such other business as may properly come before
the Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business, July 28,
1999, as the record date for determination of stockholders entitled to notice
of and to vote at the Annual Meeting.
EVEN THOUGH YOU MAY EXPECT TO BE PERSONALLY PRESENT AT THE MEETING,
PLEASE BE SURE THAT THE ENCLOSED PROXY CARD IS PROPERLY COMPLETED, DATED,
SIGNED AND RETURNED WITHOUT DELAY IN THE ACCOMPANYING ENVELOPE TO WHICH NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
GERSHON WELTMAN
Secretary
July 29, 1999
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PERCEPTRONICS, INC.
21010 Erwin Street
Woodland Hills, California 91367
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PROXY STATEMENT
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GENERAL INFORMATION
SOLICITATION, REVOCATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Perceptronics, Inc. (the
"Company"), for use at the Annual Meeting of Stockholders to be held at 10:00
a.m. on September 14, 1999, at the Company's offices located at 21010 Erwin
Street, Woodland Hills, California, and at any and all adjournments thereof.
It is anticipated that this Proxy Statement and accompanying proxy will first
be mailed to stockholders on or about August 10, 1999.
The accompanying proxy, if properly executed and returned, will be
voted as specified by the stockholder or, if no vote is indicated, the proxy
will be voted FOR the Board's nominees for director and FOR the approval of
the two stock option plans. As to any other matter of business which may be
brought before the Meeting, a vote may be cast pursuant to the accompanying
proxy in accordance with the judgment of the persons voting the same, but
management does not know of any such other matter of business. A stockholder
may revoke his proxy at any time prior to the voting of shares by voting in
person at the Meeting or by filing with the Secretary of the Company a duly
executed proxy bearing a later date or an instrument revoking the proxy.
The costs of solicitation of proxies will be paid by the Company. In
addition to soliciting proxies by mail, the Company's officers, directors and
other regular employees, without additional compensation, may solicit proxies
personally or by other appropriate means. Banks, brokers, fiduciaries and
other custodians and nominees who forward proxy soliciting material to their
principals will be reimbursed their customary and reasonable out-of-pocket
expenses.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record of the Company's Common Stock as of the
close of business on July 28, 1999 will be entitled to vote at the Meeting.
On July 28, 1999, there were outstanding 5,655,142 shares of Common Stock,
which constituted all of the outstanding voting securities of the Company,
each of which is entitled to one vote per share. A majority of the shares
entitled to vote, represented in person or by proxy, constitutes a quorum at
the Meeting. Abstentions and broker non-votes are counted as present for
purposes of determining the existence of a quorum. Abstentions are counted in
tabulations of the votes cast on proposals presented to the stockholders
(other than the election of directors), but
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broker non-votes are not counted in determining whether a proposal has been
approved. Abstentions and broker non-votes have no effect on the outcome of
the election of directors.
In the election of directors only, each stockholder has the right to
cumulate his votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares he is
entitled to vote, or to distribute his votes on the same principle among as
many candidates as he sees fit. No stockholder is entitled to cumulate votes
unless the name of the candidate or candidates for whom such votes would be
cast has been placed in nomination prior to the voting and any stockholder
has given notice at the meeting prior to the voting of such stockholder's
intention to cumulate his votes. See "Stockholder Proposals." The candidates
receiving the highest number of affirmative votes, up to the number of
directors to be elected, will be elected directors.
If voting for directors is conducted by cumulative voting, the
persons named on the enclosed proxy will have discretionary authority to
cumulate and distribute votes among the nominees with respect to which
authority was not withheld or, if the proxy either was not marked or was
marked for all nominees, among all nominees. In any case, the proxies may be
voted for less than the entire number of nominees if any situation arises
which, in the opinion of the proxy holders, makes such action necessary or
desirable.
PROPOSAL ONE - ELECTION OF DIRECTORS
The six directors to be elected at the Annual Meeting will hold
office until the next Annual Meeting of Stockholders and until the election
of their respective successors. All proxies received by the Board of
Directors will be voted for the nominees listed below if no direction to the
contrary is given. In the event that any nominee is unable or declines to
serve, an event that is not anticipated, the proxies will be voted for the
election of any nominee who may be designated by the Board of Directors.
Set forth below is information concerning the nominees for director:
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Gershon Weltman, Ph.D. 62 Chairman and Chief Executive 1969
Officer
Steven P. Corda 37 Assistant Director, New 1998
Ventures, Hughes Electronics
Corporation
Amos Freedy, Ph.D. 60 Management, American Medical 1998
Laboratories, Ltd.
John Lyman, Ph.D. 78 Professor Emeritus (retired), 1969
UCLA
Robert Parker 70 President, Flyer Group, Inc. 1992
Stanley B. Schneider 63 Partner, Gursey, Schneider and 1972
2
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Co. LLP
</TABLE>
DR. GERSHON WELTMAN was a co-founder of the Company in 1969. He
served as President from 1969 until 1982, when he became Chief Executive
Officer and Chairman of the Board. Prior to that, Dr. Weltman was a member of
the engineering faculty at the University of California, Los Angeles, where
he taught human factors engineering and other courses, and an independent
consultant to industry in the areas of human factors and biomedical
engineering. At Perceptronics, in addition to his executive role, Dr. Weltman
has served as scientific and/or technical director for a large number of R&D
programs. His work has focused on developing innovative computer-based
simulators for individual and team training. Dr. Weltman is currently serving
his second two-year term on the U.S. Army Science Board, a group that advises
the U.S. Army on scientific and technological issues. Dr. Weltman received a
Ph.D. degree in engineering in 1962 from UCLA.
MR. STEVEN P. CORDA has over 15 years experience in the
telecommunications industry. Since 1996 he has been Assistant Director, New
Ventures, at Hughes Electronics Corporation. His responsibilities include
developing new business opportunities within the Hughes Electronics business
units, focusing on the rapidly evolving global telecommunications landscape.
Before joining Hughes, Mr. Corda was the General Manager, Satellite Systems
and Services, for Binariang Sdn. Bhd., a multi-service telecommunications
provider in Malaysia from 1995 to 1996. From 1994 to 1995, Mr. Corda managed
international business development efforts at US WEST, Inc., the parent
company of Binariang Sdn. Bhd. Before joining US WEST, Inc., Mr. Corda was a
systems engineer at Hughes Aircraft Company from 1984 to 1994. Mr. Corda
holds a BSEE degree from Michigan Technological University, an MSEE from the
University of Southern California, and an MBA degree from UCLA.
DR. AMOS FREEDY was a co-founder of Perceptronics in 1969 and served
as a Director and executive officer of Perceptronics from 1969 through 1996,
when he retired. He has been providing part-time management services to
American Medical Laboratories, Ltd., of Tel Aviv, Israel, since 1997. While
at Perceptronics, Dr. Freedy specialized in robotics and the practical
applications of artificial intelligence technology, and was also the first
director of Perceptronics' ongoing, successful R&D program in the area of
High Level Architecture software for simulator networking. Dr. Freedy
received a PhD in engineering in 1969 from UCLA.
DR. JOHN LYMAN retired as a Professor Emeritus from UCLA in 1994
where he had been a Professor of Engineering and Applied Science and
Professor of Psychology since 1951. From 1969 to 1997 Dr. Lyman served as a
consultant on management and new program development to the Company. He is a
founding member and past president of the Human Factors and Ergonomics
Society and of the Biomedical Engineering Society. Dr. Lyman received a PhD
in psychology in 1951 from UCLA.
MR. ROBERT PARKER has been President and Chief Operating Officer of
Flyer Group, Inc., a manufacturer of high-performance military scout
vehicles, for the last three years, and President of Outstanding Futures,
Inc., a consulting firm, since 1990. In 1990, Mr. Parker retired as Executive
Vice President of LTV Aerospace and Defense Company, where he had served more
than a dozen years in senior management capacities, including president of
its
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missile division. As a recognized authority on research, science and
engineering for the defense industry, Mr. Parker has served on the Defense
Science Board since 1985. This advisory panel, appointed by the U.S.
Secretary of Defense, provides independent scientific evaluations of advanced
defense systems. Mr. Parker also serves on the Advisory Board of Directors
for the Association of the U.S. Army, on the Land Warfare Committee, and as a
director of the American Defense Preparedness Association. From 1973 to 1977,
he was principal deputy director of defense research and engineering in the
U.S. Department of Defense. Mr. Parker received an MS degree in 1956 from
UCLA.
MR. STANLEY B. SCHNEIDER is a Certified Public Accountant and has
been a partner in the Los Angeles accounting firm of Gursey, Schneider and
Co. LLP for more than five years. Mr. Schneider is also a director of Chicago
Pizza & Brewery, Inc., Jerry's Famous Deli, Inc., The Autry Museum of Western
Heritage and P.A.T.H. Mr. Schneider received a B.A. degree in 1958 from UCLA.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held four meetings during the
fiscal year ended March 31, 1999. Amos Freedy did not attend one meeting. The
Audit Committee is responsible for periodically reviewing the financial
condition, and the results of audit examinations, of the Company with its
independent accountants. Stanley Schneider serves on the Audit Committee and
an additional member will be appointed to fill an existing vacancy. The Audit
Committee did not meet during the last fiscal year. The members of the
Compensation Committee are Steven P. Corda and John Lyman. The
responsibilities of the Compensation Committee include reviewing and
recommending to the Board the compensation, bonuses and employee benefits of
senior management. The Compensation Committee did not meet during the last
fiscal year. The Board also has a Stock Option Committee consisting of Amos
Freedy, John Lyman and Robert Parker, which administers the Company's stock
option plans and may approve stock option grants. The Stock Option Committee
did not meet during the last fiscal year as the Board of Directors served in
this capacity. The Company does not have a nominating committee.
DIRECTORS' COMPENSATION
Directors are not paid cash fees for attending Board of Directors or
committee meetings, but they are reimbursed their out-of-pocket expenses for
attending such meetings.
Under the Company's 1988 Directors' Stock Option Plan, on April 1 of
each year, each non-employee director of the Company was automatically
granted fully vested, 5-year stock options to purchase 2,000 shares of Common
Stock at an exercise price equal to 100% of the fair market value of the
Common Stock on the date of grant. Under this plan, each of Messrs. Lyman,
Parker and Schneider was granted 2,000 options on April 1, 1998 at an
exercise price of $0.52 per share. This plan terminated in July 1998. As a
result, the Company's Board of Directors is seeking stockholder approval of
the 1999 Stock Option Plan for Non-Employee Directors which is described
below under the heading "Proposal Three - Approval of the 1999 Stock Option
Plan for Non-Employee Directors." Since they will be eligible to receive
automatic annual option grants under this new plan, each of Steven P. Corda,
Amos Freedy,
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John Lyman, Robert Parker and Stanley B. Schneider have an interest in the
approval of the new plan.
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EXECUTIVE OFFICERS
The following information is provided with respect to the Company's
current executive officers. Officers serve at the discretion of the Board of
Directors.
DR. GERSHON WELTMAN (age 63) has served as Chief Executive Officer
and Chairman of the Board since 1982. See "Proposal One - Election of
Directors."
MR. THOMAS J. LUBACZEWSKI (age 52) is Senior Vice President,
Training Systems and Chief Operating Officer with specific responsibility for
training system programs at the Company. He was appointed Chief Operating
Officer in January 1997. Prior to joining the Company in 1986, Mr.
Lubaczewski served as a Lieutenant Colonel in the U.S. Army, where he
directed development and use of command training simulations in the Army's
simulation center in Ft. Leavenworth, Kansas.
DR. RICHARD E. VESTEWIG (age 52) joined the Company in 1987 and has
served as Senior Vice President, Software Systems since 1996. He is
responsible for the management of software systems, including ongoing work on
interactive simulation protocols and HLA/R.I. prototype application
development, and knowledge-based process management software. Prior to
joining the Company, he was employed at Honeywell Systems and Research
Center, where he led development of voice recognition and CGI programs. He
holds a Ph.D. from the University of Michigan and a B.A. from Yale University.
MR. ROBERT E. ANDERSON (age 58) was appointed Senior Vice President
Finance and Chief Financial Officer in August 1997. During the preceding
year, Mr. Anderson worked for the Company in a financial consulting capacity.
Mr. Anderson previously served as a consultant to Parnelli Jones Inc. from
January 1996 to August 1996 and as Director of Finance for Whittaker
Corporation from May 1993 to September 1995. From 1984 to 1992, Mr. Anderson
served as Director of Finance for TransTechnology Corporation. He is a CPA
and holds an MBA degree from Pepperdine University.
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PROPOSAL TWO - APPROVAL OF THE 1999 STOCK OPTION PLAN
The Board of Directors believes that it is in the best interests of
the Company and its stockholders to provide incentive for the encouragement
of the highest level of performance by selected employees, consultants and
advisors of the Company by enabling these persons to acquire a proprietary
interest in the Company. Accordingly, on June 29, 1999, the Board of
Directors adopted, subject to stockholder approval, the 1999 Stock Option
Plan (the "Plan") pursuant to which up to 500,000 shares of Common Stock may
be issued upon the exercise of stock options granted to eligible participants.
Currently, the only option plan under which the Company may grant
options is the 1992 Stock Option Plan. At June 30, 1999, there were 250,900
options outstanding under the 1992 plan and 13,000 shares available for
future option grants under this plan. The Company also has outstanding a
total of 61,800 options previously granted under other option plans,
including 24,000 outstanding options granted under the 1988 Directors' Stock
Option Plan for non-employee directors. Due to the limited number of shares
available for option grants under the 1992 plan, the Board of Directors
decided to adopt the 1999 plan so that the Company would be able to continue
to grant options as a means of attracting, retaining and motivating
employees, consultants and advisors. The Board of Directors has also adopted,
and is seeking stockholder approval of, a new plan which provides for
automatic option grants to non-employee directors, as discussed under
"Proposal Three - Approval of the 1999 Stock Option Plan for Non-Employee
Directors."
The following summary of the principal provisions of the 1999 plan
is subject to the full text thereof. A copy of the 1999 plan may be obtained
from the Company by any stockholder upon written request.
GENERAL NATURE AND PURPOSE OF THE PLAN
The underlying objective of the 1999 plan is to further the
interests of the Company by strengthening the desire of employees and
consultants to continue their employment with the Company and by inducing
individuals to become employees, consultants or advisors of the Company
through the grant of options. Options issued under the 1999 plan may be
either incentive stock options under Section 422 of the Internal Revenue Code
of 1986 (the "Code"), or non-qualified stock options.
SECURITIES SUBJECT TO THE PLAN
The 1999 plan authorizes the issuance of up to 500,000 shares of the
Company's Common Stock, which represents approximately 9% of the shares
outstanding on June 30, 1999. In the event of any change in the number of
outstanding shares of Common Stock by reason of reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, exchange or
combination of shares or other similar transactions, appropriate and
proportionate adjustment will be made in the number of shares subject to
outstanding options and the exercise price thereof.
ADMINISTRATION
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The 1999 plan may be administered either by a committee consisting
of at least two directors appointed by the Board of Directors or by the Board
of Directors. If a committee is appointed, the Board of Directors, instead of
that committee, may at any time take any action permitted to be taken by such
committee under the Plan. As used herein, the term "Committee" refers to the
body, whether a committee or the Board of Directors, which is at the time
administering the Plan. The Stock Option Committee of the Board of Directors
consists of Amos Freedy, John Lyman and Robert Parker, all of whom will be
eligible for automatic annual option grants under the 1999 Stock Option Plan
for Non-Employee Directors, which is also being submitted for stockholder
approval at this Annual Meeting. The Committee has full authority, subject to
the provisions of the 1999 plan, to grant options, to designate the
recipients and determine the terms of the options, to establish rules and
regulations which it deems appropriate for the proper administration of the
plan, and to interpret and make determinations under the plan. Members of the
Committee serve at the discretion of the Board.
ELIGIBILITY
Options may be granted to persons who are employees, consultants or
advisors of the Company or any subsidiary or parent company of the Company.
In addition, non-employee directors of the Company may receive options under
the 1999 plan only if they are not otherwise eligible to participate in any
Company stock option plan that is available only to non-employee directors of
the Company. Therefore, if the 1999 Stock Option Plan for Non- Employee
Directors is not approved by the stockholders, non-employee directors will be
eligible for option grants under the 1999 plan. Incentive options may be
granted only to employees of the Company or any subsidiary or parent of the
Company.
At June 30, 1999, the Company had 20 employees and two consultants
who were eligible to receive options under the plan. At June 30, 1999,
executive officers as a group (four persons) held options to purchase 164,500
shares, and all employees as a group (other than executive officers) held
options to purchase 124,200 shares of Common Stock under all of the Company's
option plans.
For information concerning stock options previously granted to
certain executive officers and directors of the Company under the Company's
other plans, see "Executive Compensation" and "Proposal One - Election of
Directors -Directors' Compensation."
TERMS AND CONDITIONS OF OPTIONS
Options granted under the 1999 plan expire on such date as is
determined by the Committee, unless earlier terminated as provided in the
plan, but in no event later than ten years after the grant date (five years
with respect to incentive options granted to an optionee who owns, or would
be considered to own by reason of Section 424(d) of the Code, more than 10%
of the outstanding Common Stock of the Company or any subsidiary on the grant
date).
Options are exercisable in installments as determined by the
Committee, except that options must vest at a rate of at least 20% per year
beginning one year after the grant date. The exercise price for options is
determined by the Committee at the time of grant, subject to the following:
(1) the exercise price of an incentive option may not be less than 100% of
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the fair market value of the Common Stock on the grant date (110% of the fair
market value in the case of incentive options granted to a person who on the
grant date owns or is considered to own more than 10% of the outstanding
Common Stock); and (2) the exercise price of a non-qualified option may not
be less than 85% of the fair market value of the Common Stock on the grant
date. On July 23, 1999, the closing price of the Company's Common Stock on
the OTC Bulletin Board was $0.9375 per share.
If the aggregate fair market value (determined at the time each
incentive option is granted) of Common Stock for which all incentive options
held by an optionee (whether granted under the 1999 plan or any other plan of
the Company) are exercisable for the first time during any calendar year
exceeds $100,000, the amount of such excess will be treated as a
non-qualified option.
The exercise price of an option is payable in cash or, with the
approval of the Committee, in shares of the Company's Common Stock that have
been owned by the optionee for at least six months, by full recourse
promissory note secured by the shares purchased, by cancellation of
indebtedness of the Company to the optionee, by waiver of compensation due or
accrued for services rendered, or through a same day sale arranged through a
broker.
If an optionee ceases to be employed or retained by the Company for
any reason other than death or permanent disability, options will expire on
the earlier of three months from the date of such termination or expiration
of the term of the option. During the period between the optionee's
termination and expiration of the option, the option may only be exercised to
the extent that it was exercisable on the date of such termination. Upon the
death or permanent disability of an optionee while an employee, director,
consultant or advisor, options will expire on the earlier of one year from
the date of death or permanent disability or the expiration of the term of
the option, and can be exercised only to the extent that the options could
have been exercised on the date of death or permanent disability.
TRANSFERABILITY OF AWARDS
Options granted under the 1999 plan are not transferable or
assignable other than by will or by the laws of descent and distribution.
DURATION AND MODIFICATION OF THE PLAN AND OPTIONS
The 1999 plan will remain in effect until all shares covered by
options granted under the plan have been purchased or all rights to acquire
the shares have lapsed. No options may be granted under the plan after June
28, 2009, although the Board of Directors may terminate the granting of
options under the plan at an earlier date or may amend or otherwise modify
the plan. Except for adjustments made necessary by changes in the Company's
Common Stock, the Board of Directors may not, without stockholder approval,
increase the total number of shares to be offered under the plan or
materially modify the eligible class of participants in the plan.
The Committee may modify or amend the terms of outstanding options,
including to change or accelerate the vesting of an options or to change the
exercise price of an option, with the consent of the participant.
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In the event of the liquidation or dissolution of the Company, or
upon any reorganization, merger or consolidation in which the Company is not
the survivor, or upon the sale (by merger or otherwise) of substantially all
of the assets of the Company or of more than 80% of the then outstanding
stock of the Company to another corporation or entity, unless the options are
assumed or equivalent options are substituted by the surviving or acquiring
company, all outstanding options will become fully exercisable during the 30
days preceding the effective date of such event and will terminate on the
effective date of such event.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is only a summary of certain significant
United States federal income tax consequences of the 1999 plan based on
currently applicable provisions of the Code and the regulations promulgated
thereon.
GRANT OF STOCK OPTIONS. The grant of an incentive option or a
non-qualified option under the 1999 plan is not a taxable event to the
optionee.
EXERCISE OF NON-QUALIFIED STOCK OPTIONS. An optionee will recognize
ordinary income for federal income tax purposes on the date a non-qualified
option is exercised. The amount of income recognized is equal to the excess
of the fair market value of the shares acquired on the date of exercise over
the purchase price of such shares. The optionee's tax basis in the shares
acquired upon the exercise of a non-qualified option is equal to the fair
market value of such shares on the exercise date. The optionee will recognize
capital gain or loss upon a sale or exchange of the option shares to the
extent of any difference between the amount realized and the optionee's tax
basis in the shares.
EXERCISE OF INCENTIVE STOCK OPTIONS. An optionee will not recognize
income upon the exercise of an incentive option. However, the "spread"
between the fair market value of the shares at the time of exercise and the
exercise price is includible in the calculation of alternative minimum
taxable income for purposes of the alternative minimum tax.
If the optionee does not dispose of the shares received upon
exercise of the option within both the two-year period after the incentive
option was granted and the one-year period after the exercise of the
incentive option (the "ISO holding periods"), the optionee will recognize
capital gain or loss when he disposes of the shares. Such gain or loss will
be measured by the difference between the exercise price and the amount
received for the shares at the time of disposition.
If the shares acquired upon exercise of an incentive option are
disposed of before the end of the ISO holding periods, the disposition is a
"disqualifying disposition" which results in the optionee recognizing
ordinary income in an amount generally equal to the lesser of (1) the excess
of the value of the shares on the option exercise date over the exercise
price or (2) the excess of the amount received upon disposition of the shares
over the exercise price. Any excess of the amount received upon disposition
of the shares over the value of the shares on the exercise date will be taxed
to the optionee as capital gain.
COMPANY DEDUCTIONS. The Company (or its subsidiary) generally is
entitled to a deduction for federal income tax purposes at the same time and
in the same amount that the participant recognizes ordinary income, to the
extent that such income is considered
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reasonable compensation under the Code. Deductions may be limited by Section
162(m) of the Code with respect to options granted to certain executive
officers if the options do not qualify as "performance-based compensation"
under that section. Neither the Company nor any subsidiary is entitled to a
deduction with respect to payments that constitute "excess parachute
payments" pursuant to Section 280G of the Code and that do not qualify as
reasonable compensation pursuant to that section. Such payments also subject
the recipients to a 20% excise tax.
ACCOUNTING TREATMENT
Option grants to employees and directors with an exercise price less
than the fair market value of the common stock on the grant date will result
in compensation expense to the Company in an amount equal to the excess of
the fair market value of the shares on the grant date over the exercise
price. This charge will generally be expensed by the Company over the vesting
period of the option. Option grants with exercise prices not less than fair
market value on the grant date will not result in any direct charge to the
Company's earnings. However, the fair value of these options is required to
be disclosed in the notes to the Company's financial statements and the
Company must also disclose, on a proforma basis, the impact that those
options would have on the Company's reported earnings with the value of the
options at the time of grant treated as a compensation expense. Whether or
not granted at a discount, the number of outstanding options may be a factor
in determining the Company's earnings per share on a fully diluted basis.
The Financial Accounting Standards Board recently issued an exposure
draft of a proposed interpretation of APB Opinion 25, "Accounting for Stock
Issued to Employees." Under the proposed interpretation, option grants made
to non-employee directors after December 15, 1998 will result in a direct
charge to the Company's reporting earnings based on the value of the option
measured initially as of the grant date and subsequently on the vesting date
of each installment of the option. Accordingly, this charge will include the
appreciation and the value of the option shares, if any, over the period
between the grant date and the vesting date of the option. This accounting
treatment is the same as is currently applied to option grants to independent
consultants. Stock options to be granted under the 1999 Stock Option Plan for
Non-Employee Directors will be fully vested on the grant date, resulting in a
valuation and an earnings charge on the grant date only.
VOTE REQUIRED
The affirmative vote of a majority of the shares represented in
person or by proxy and entitled to vote on this proposal is necessary for the
approval of the 1999 plan. Abstentions are counted in the tabulation of votes
entitled to be cast and therefore have the effect of a vote against the
proposal, whereas broker non-votes are not counted and have no effect on the
vote.
The Board of Directors recommends that the stockholders vote FOR
approval of the 1999 plan.
11
<PAGE>
PROPOSAL THREE - APPROVAL OF THE 1999 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
BACKGROUND
Since 1988, the Company has provided for automatic annual option
grants to non-employee directors in lieu of cash directors fees. These
options were granted under the 1988 Directors' Stock Option Plan which
expired in July 1998. As a result, the Board of Directors is seeking
stockholder approval of the 1999 Stock Option Plan for Non-Employee Directors
so that the Company may continue to compensate and incentivize non-employee
directors and align their interests with the interests of the Company's
stockholders through the grant of stock options. The 1988 Directors' Stock
Option Plan is described under "Proposal One - Election of Directors -
Directors' Compensation." Because that plan expired in July 1998,
non-employee directors have not received option grants since April 1, 1998.
TERMS OF THE PLAN
The following summary of the principal provisions of the proposed
plan is subject to the full text thereof. A copy of this plan may be obtained
from the Company by any stockholder upon written request.
The purpose of the 1999 Stock Option Plan for Non-Employee Directors
is to assist the Company in attracting, motivating and retaining qualified
non-employee directors by enabling them to acquire a proprietary interest in
the Company through the grant of stock options. This plan authorizes the
issuance of up to 250,000 shares of Common Stock over a ten year period. In
the event of any change in the number of outstanding shares of Common Stock
by reason of reorganization, merger, recapitalization, reclassification,
stock dividend, stock split, exchange or combination of shares or other
similar transactions, appropriate and proportionate adjustment will be made
in the number of shares subject to the plan and subject to outstanding
options and the exercise price thereof.
Only non-employee directors of the Company are eligible to
participate in this plan. On the date the plan is first approved by the
Company's stockholders and on April 1 of each year thereafter, each
non-employee director of the Company who was a non-employee director for the
entire immediately preceding year will automatically be granted an option to
purchase 12,500 shares of Common Stock. Any director who was not a
non-employee director for the entire immediately preceding year will be
granted options for a pro rata number of shares based on the number of months
that person was a non-employee director during the preceding year. The
exercise price of the options will be equal to 100% of the fair market value
of the Common Stock on the date of grant. The options will be 100% vested on
the grant date. Payment of the exercise price may be made in cash or by
surrender of shares of Common Stock of Perceptronics which have been owned by
the director for at least six months. Options are not transferrable or
assignable other than by will or by the laws of descent and distribution.
If the plan is approved by the stockholders, on the date of the
Annual Meeting of Stockholders each of Steven P. Corda, Amos Freedy, John
Lyman, Robert Parker and Stanley B. Schneider will receive options for 12,500
shares at an exercise price equal to the fair market value of Common Stock on
that day. On July 23, 1999, the closing price of the
12
<PAGE>
Common Stock on the OTC Bulletin Board was $0.9375 per share. If this plan is
not approved by the stockholders, non-employee directors will be eligible to
receive option grants under the 1999 Stock Option Plan which is described
above under "Proposal Two - Approval of the 1999 Stock Option Plan."
Options granted under this plan will expire on the first to occur of:
- five years from the date granted;
- the effective date of the dissolution or liquidation of the
Company, or any reorganization, merger or consolidation with
one or more corporations or entities as a result of which the
Company is not the surviving corporation, the sale of all or
substantially all of the assets of the Company or the sale (by
merger or otherwise) of more than 80% of the then outstanding
Common Stock;
- three months after the optionee ceases to be a director of the
Company for any reason other than death or termination for
cause as described below;
- one-year after the optionee's death while serving as a
director or within three months of having served as a
director; and
- the date the optionee's directorship is terminated due to an
act of fraud or intentional misrepresentation, or
embezzlement, misappropriation or conversion of assets or
opportunities of the Company.
The plan may be amended or terminated at any time by the Board of
Directors, except that the stockholders must approve any amendment that would
increase the number of shares which may be issued under the plan or
materially modify the requirements as to eligibility for participation in the
plan. No options may be granted under the plan after ten years from the date
it is approved by the stockholders.
Options granted under the plan will be treated as "non-qualified
stock options" for federal income tax purposes. The federal income tax
consequences and accounting treatment applicable to options granted under the
plan are described under the headings "Proposal Two Approval of the 1999
Stock Option Plan - Federal Income Tax Consequences; - Accounting Treatment."
VOTE REQUIRED
The affirmative vote of a majority of the shares represented in
person or by proxy and entitled to vote on this proposal is necessary for
approval of the 1999 Stock Option Plan for Non-Employee Directors.
Abstentions are counted in the tabulation of votes entitled to be cast and
therefore have the effect of a vote against their proposal, whereas broker
non-votes are not counted and have no effect on the vote. Stockholder
approval of the plan will have the effect of exempting the grant and exercise
of options under the plan, and the surrender of shares in payment for the
exercise price of options, from Section 16 of the Securities Exchange Act of
1934.
The Board of Directors recommends that the stockholders vote FOR
approval of the plan.
13
<PAGE>
EXECUTIVE COMPENSATION
The following tables provide information concerning the compensation
of the Chief Executive Officer and each other executive officer whose total
salary and bonus exceeded $100,000 in the fiscal year ended March 31, 1999
(the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary(1) Bonus Options (#) Compensation(2)
- --------------------------- ---- --------- ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Dr. Gershon Weltman, 1999 $179,563 $-0- -0- $17,433
Chief Executive Officer 1998 162,741 -0- 45,000 17,433
1997 108,537 -0- -0- 17,433
Thomas J. Lubaczewski, 1999 123,385 10,000 -0- -0-
Senior Vice President 1998 125,298 10,000 20,000 -0-
Chief Operating Officer 1997 107,494 -0- -0- -0-
Richard E. Vestewig, 1999 100,272 -0- 15,000 -0-
Senior Vice President 1998 101,826 -0- -0- -0-
1997 91,464 -0- -0- -0-
Robert E. Anderson, 1999 101,200 -0- -0-
Senior Vice President 1998 90,480(3) -0- 53,500 -0-
Chief Financial Officer
</TABLE>
- ----------
(1) Includes amounts deferred under to the Company's 401(K) Plan and
payments for vacation in lieu of time off.
(2) Represents premiums for life and disability insurance for the benefit
of Dr. Weltman.
(3) Mr. Anderson became an executive officer in August 1997 and served as a
consultant to the Company prior thereto.
FISCAL YEAR 1999 OPTION GRANTS
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees in Price Per Expiration
Name Granted (1) Fiscal Year Share (2) Date
- ----------------------- ------------- ------------- --------- -----
<S> <C> <C> <C> <C>
Dr. Gershon Weltman -0- --- --- ---
Thomas J. Lubaczewski -0- --- --- ---
Richard E. Vestewig 15,000 38% $0.485 8/03
Robert E. Anderson -0- --- --- ---
</TABLE>
14
<PAGE>
- ----------
(1) The options are fully vested and are subject to earlier termination in
the event of termination of employment, death and certain corporate
events as described under "Option Exercises and Fiscal Year-End Option
Values."
(2) Fair market value of the Common Stock on the grant date.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Options Held at In-the-Money Options
Name Exercise Realized(1) Fiscal Year-End at Fiscal Year-End(2)
- --------------------- ----------- ---------- ---------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Gershon Weltman 1,000 $ 344 54,000 3,000 $13,653 $1,804
Thomas J. Lubaczewski 5,000 1,719 18,000 3,000 4,669 1,804
5,000 2,156
2,000 1,203
Richard E. Vestewig 4,000 1,705 30,000 3,000 7,556 1,804
2,000 953
1,000 864
Robert E. Anderson -0- -- 51,400 2,100 16,404 1,263
</TABLE>
- ----------
(1) Represents the difference between the aggregate market value on the
date of exercise and the aggregate exercise price in accordance with
SEC rules. The actual value which may be realized depends on the amount
by which the sales price of the shares exceeds the exercise price.
(2) Represents the difference between the aggregate market value on March
31, 1999 ($.78125 per share) and the aggregate exercise price of
options with an exercise price of less than $.78125 per share.
Under the terms of the Company's stock option plans, the Stock
Option Committee may modify the terms of outstanding options, including the
exercise price and vesting schedule. In the event of the dissolution or
liquidation of the Company, or any reorganization, merger or consolidation in
which the Company is not the surviving corporation, or the sale of
substantially all of the Company's assets or of more than 80% of its
outstanding stock to another corporation or entity, all outstanding options
will become fully exercisable 30 days prior to the effective date of any such
transaction unless the options are assumed by the surviving or successor
corporation.
EMPLOYMENT AGREEMENTS
Dr. Gershon Weltman is employed pursuant to an employment agreement
with the Company which automatically renews for one-year periods unless
notice is given by either party at least thirty days prior to August 1 of
each year. The agreement provided for a minimum annual base salary of
$168,000, which is adjusted annually for increases in the Consumer Price
Index for Los Angeles. In the event Dr. Weltman becomes permanently disabled
during the term of the agreement, he will be entitled to a minimum monthly
disability
15
<PAGE>
benefit of approximately $8,000. If Dr. Weltman dies during the term of the
agreement, the Company will receive a payment of $500,000 and his beneficiary
will receive a payment of $750,000. The Company is funding the disability and
death benefits payable to Dr. Weltman with insurance policies. Dr. Weltman
has the right to terminate his employment in the event of a change in control
(as defined in the agreement) of the Company if he determines in his sole
discretion that such change would impair his ability to effectively discharge
his duties or if his position is down-graded. If Dr. Weltman terminates his
employment because of such a change of control, he will be entitled to
receive in each of the three years following termination of employment an
amount equal to 60%, 50% and 40%, respectively, of his base annual salary
plus bonus, if any, for the year immediately preceding such termination
payable in 36 monthly installments. During the term of his employment and
during any period in which he receives severance benefits, Dr. Weltman may
not directly or indirectly engage or participate in any business that is in
competition with the Company.
Thomas Lubaczewski is employed in the capacity of Senior Vice
President and Chief Operating Officer pursuant to a three-year employment
agreement dated January 1, 1997, which provides for a minimum base salary of
$124,800 and a minimum $20,000 annual bonus that is contingent upon the
Company achieving certain profit levels. The agreement provides for annual
stock option grants based on the Company's profitability. If his employment
is terminated by the Company for reasons other than death, disability,
criminal misconduct or gross neglect of duties, Mr. Lubaczewski is entitled
to receive severance payments over twelve months based on an amount equal to
50%, 75% or 100% of his compensation for the preceding fiscal year, should
the termination occur in the first year, second year or third year,
respectively, of the agreement term.
CERTAIN TRANSACTIONS
In July 1998, Eagle Capital, Ltd., a limited partnership, purchased
for $200,000 cash, 444,444 shares of Common Stock and warrants exercisable
for 300,000 shares of Common Stock. The warrants were exercisable for 100,000
shares at $0.75 per share until July 10, 1999, for 100,000 shares at $1.00
per share until January 10, 1999, and for 100,000 shares at $1.50 per share
until January 10, 2000. In October 1998, the Company and Eagle Capital, Ltd.
amended the warrant agreement to increase the number of shares of Common
Stock that could be purchased from 300,000 shares to 444,444 shares, to
change the purchase price for all shares to $0.70 per share, and to provide
for an expiration date of June 18, 2003.
In June 1998, TWG, Inc. subscribed to purchase for $125,000 cash,
payable in installments, 312,500 shares of Common Stock and warrants
exercisable for 312,500 shares. TWG paid $80,000 of this subscription,
resulting in the purchase of 200,000 shares and warrants for 200,000 shares.
The warrants have a five-year term and are exercisable for $.75 per share.
The unpaid subscription has been cancelled.
Instead of paying the exercise price in cash, all of the foregoing
warrants may be exercised for the net number of shares issuable on the basis
that a portion of the shares having a fair market value equal to the exercise
price are delivered in payment of the exercise price. The Company has also
granted the warrantholders the right to include their shares of Common Stock
in certain registration statements filed by the Company under the Securities
Act of 1933. See "Ownership of Common Stock."
16
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of June 30,
1999, with respect to ownership of the Company's Common Stock by (i) each
person who is known by the Company to own beneficially 5% or more of the
Common Stock, (ii) each Named Officer, (iii) each director of the Company and
(iv) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially Percentage
Name* Owned Ownership
- ------------------------------------- --------------------- ---------
<S> <C> <C>
Dr. Gershon Weltman 303,181 (1) 5.3%
21010 Erwin Street
Woodland Hills, CA 91367
Dr. Amos Freedy 282,919 (2) 4.9%
3A Kashani Street
Tel Aviv, Israel
Steven P. Corda -0- **
Dr. John Lyman 196,911 (3) 3.5%
Stanley B. Schneider 137,111 (4) 2.4%
Robert Parker 10,500 (5) **
Thomas J. Lubaczewski 60,000 (6) 1.1%
Dr. Richard E. Vestewig 37,000 (7) **
Robert E. Anderson 51,400 (8) **
All Executive Officers and Directors 1,078,969 (9) 18.3%
as a Group (9 persons)
Winston Mar 539,286 (10) 9.1%
TWG, Inc.
5631 Leeds Street
Southgate, CA 90280
Eagle Capital, Ltd. 888,888 (11) 14.6%
3836 North Keeler Street
Suite 200
Chicago, Illinois 60641
</TABLE>
- ----------
* Includes addresses of 5% or more stockholders
** Less than 1%
(1) Includes 54,000 shares subject to options which are exercisable within
60 days and 1,670 shares held in the Company's 401(k) Plan over which
Dr. Weltman, as trustee, has voting power.
17
<PAGE>
(2) Includes 155,521 shares of Common Stock and warrants to purchase
55,556 shares of Common Stock held by the Freedy Family Trust, of
which Mr. Freedy is a trustor and beneficiary; 59,842 shares held
for the benefit of minor children; and 12,000 shares subject to
options which are exercisable within 60 days.
(3) Includes 8,000 shares subject to options which are exercisable within
60 days.
(4) Includes 8,000 shares subject to options which are exercisable within
60 days.
(5) Includes 10,500 shares subject to options which are exercisable within
60 days.
(6) Includes 18,000 shares subject to options which are exercisable within
60 days.
(7) Includes 30,000 shares subject to options which are exercisable within
60 days.
(8) Includes 51,400 shares subject to options which are exercisable within
60 days.
(9) Includes the shares described in Notes (1) through (8).
(10) Includes 282,143 shares subject to exercisable warrants. TWG, Inc., the
record owner of the shares, is controlled by Winston Mar.
(11) Includes 444,444 shares subject to exercisable warrants. Eagle Capital,
Ltd. is a limited partnership of which Michael P. Traba and Christine
M. Traba, husband and wife, are general partners.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers, directors and holders that own more than 10% of
Perceptronics stock to file reports regarding their ownership and changes in
ownership of Perceptronics equity securities. Based on its review of these
reports and written statements from executive officers and directors,
Perceptronics is aware of the following filing deficiencies; Amos Freedy,
Michael Laney (a former director), Eagle Capital, Ltd., Michael P. Traba,
Christine M. Traba and Daniel J. Mack as custodian for Andrew M. Traba each
filed a late Form 3; Thomas J. Lubaczewski, Richard E. Vestewig, Eagle
Capital, Ltd., Michael P. Traba, Christine M. Traba and Daniel J. Mack as
custodian for Andrew M. Traba each filed a Form 4 late, each with respect to
one transaction; and TWG, Inc. did not file a Form 3 upon subscribing to
purchase shares and warrants, which purchases, if completed ,would have made
it a holder of more than 10% of the outstanding Common Stock at that time.
TWG, Inc. did not complete the purchases and does not beneficially own more
than 10% of the outstanding Common Stock at June 30, 1999. See "Certain
Transactions."
18
<PAGE>
AUDITORS OF THE COMPANY
The Company's independent certified public accountants for the
fiscal year ended March 31, 1999 were Beckman Kirkland & Whitney, which firm
the Company intends to appoint for the current fiscal year. A representative
of Beckman Kirkland & Whitney is expected to be present at the Meeting with
the opportunity to make a statement if he so desires and to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder intending to submit to the Company a proposal for
inclusion in the Company's Proxy Statement and proxy for the Annual Meeting
of Stockholders to be held in 2000 must submit such proposal so that it is
received by the Company no later than April 13, 2000, and such proposal must
otherwise comply with the Company's Bylaws and Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
Pursuant to the Company's Bylaws, no business proposal will be
considered properly brought before an Annual Meeting by a stockholder, and no
nomination for the election of directors will be considered properly made at
an Annual Meeting by a stockholder, unless advance notice thereof and certain
information is provided to the Company in accordance with the Bylaws by June
14, 2000. If a stockholder submits a proposal at the Annual Meeting of
Stockholders to be held in 2000 other than in accordance with Rule 14a-8 and
does not provide notice of such proposal to the Company by June 14, 2000, the
holders of any proxy solicited by the Company's Board of Directors for use at
such meeting will have discretionary authority to vote with respect to any
proposal as to which timely notice is not given.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the meeting,
the Board of Directors has no knowledge of any matters to be presented for
action by the stockholders other than as set forth above. The enclosed proxy
gives discretionary authority, however, in the event any additional matters
should be properly presented.
GERSHON WELTMAN
Secretary
July 29, 1999
19
<PAGE>
PERCEPTRONICS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 14, 1999
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints DR. GERSHON WELTMAN and THOMAS LUBACZEWSKI, and each of them, the
attorneys and proxies of the undersigned with full power of substitution to
appear and to vote all of the common shares of PERCEPTRONICS, INC. held of
record by the undersigned on July 28, 1999, at the Annual Meeting of
Stockholders to be held on September 14, 1999, or any adjournment thereof, as
indicated below and, in their discretion, on other matters which properly come
before the meeting.
<TABLE>
<S> <C>
(1) ELECTION OF DIRECTORS:
/ / FOR all nominees listed below (except / / WITHHOLD AUTHORITY to vote for all nominees listed
as below
indicated to the contrary below)
</TABLE>
Dr. Gershon Weltman, Steven P. Corda, Dr. Amos Freedy, Dr. John Lyman, Robert
Parker, Stanley B. Schneider
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
(2) To approve the 1999 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
(3) To approve the 1999 Stock Option Plan for Non-Employee Directors.
FOR / / AGAINST / / ABSTAIN / /
(4) IN THEIR DISCRETION, ON OTHER MATTERS WHICH PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PERCEPTRONICS, INC. IF NO VOTE IS INDICATED, THIS PROXY WILL BE VOTED WITH
AUTHORITY FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS (2)
AND (3).
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
YOU ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THIS PROXY IN THE ENVELOPE
PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
IMPORTANT: Please sign
exactly as your name or
names appear on the share
certificates, and when
signing as an attorney,
executor, administrator,
trustee or guardian, give
your full title as such. If
the signatory is a
corporation, sign the full
corporate name by duly
authorized officer, or if a
partnership, sign in
partnership name by
authorized person.
Date: ________________, 1999
____________________________
Signature
____________________________
Signature
<PAGE>
PERCEPTRONICS, INC.
1999 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Perceptronics, Inc. 1999 Stock Option Plan (the
"Plan") is to further the interests of Perceptronics, Inc. (the "Company") and
its Subsidiaries by strengthening the desire of Employees to continue their
relationship with the Company and its Subsidiaries and by inducing individuals
to become Employees of the Company and its Subsidiaries through stock options to
be granted hereunder. Options granted under the Plan are either options
intending to qualify as "incentive stock options" within the meaning of Section
422 of the Code or non-qualified stock options.
2. DEFINITIONS
Whenever used herein the following terms shall have the following
meanings, respectively:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a Committee of at least two directors
appointed by the Board, or if no such committee has been appointed reference to
"Committee" shall be deemed to refer to the Board.
(d) "Common Stock" shall mean the Company's Common Stock as described
in the Company's Certificate of Incorporation, as amended from time to time.
(e) "Company" shall mean Perceptronics, Inc., a Delaware corporation.
(f) "Employee" shall mean in connection with Non-Qualified Options,
any officer, employee, consultant or advisor of the Company or any Subsidiary or
Parent Corporation of the Company, and any director of the Company who is not an
employee of the Company or any Subsidiary or Parent Corporation of the Company
and which director is not otherwise eligible to participate in any Company stock
options plan available only to non-employee directors of the Company, it being
understood that the Committee may in its discretion also grant Options to induce
individuals to become and remain as Employees and that such persons, for
purposes of receiving Non-Qualified Options hereunder, shall be deemed
"Employees." In connection with Incentive Options under this Plan, the term
Employee shall mean any individual who is employed, within the meaning of
Section 3401 of the Code, by the Company or any Subsidiary or Parent Corporation
of the Company.
1
<PAGE>
(g) "Fair Market Value Per Share" of the Company's Common Stock shall
mean if the Company's Common Stock is publicly traded the mean between the
highest and lowest quoted selling prices of the Common Stock on the date of the
grant of the Option or, if not available, the mean between the bona fide bid and
asked prices of the Common Stock on the date of the grant of the Option. In any
situation not covered above or if there were no sales on the date of the grant
of an Option, the Fair Market Value Per Share shall be determined by the
Committee in good faith based on uniform principles consistently applied.
(h) "Incentive Option" shall mean an Option granted under the Plan
which is designated as and qualifies as an incentive stock option within the
meaning of Section 422 of the Code.
(i) "Non-Qualified Option" shall mean an Option granted under the Plan
which is designated as a non-qualified stock option or which does not qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(j) "Option" shall mean an Incentive Option or a Non-Qualified Option.
Each Option shall be evidenced by a written agreement executed by the Company
which shall set forth the terms and conditions of such Option.
(k) "Optionee" shall mean any Employee who has been granted an Option
under the Plan.
(l) "Parent Corporation" shall have the meaning set forth in Section
424(e) of the Code.
(m) "Permanent Disability" shall mean termination of employment with
the Company or any Subsidiary or Parent Corporation of the Company with the
consent of the Company or such Subsidiary by reason of permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
(n) "Plan" shall mean the Perceptronics, Inc. 1999 Stock Option Plan,
as from time to time amended.
(o) "Subsidiary", in the case of Incentive Options, shall have the
meaning set forth in Section 424(f) of the Code (generally, 50% or more owned
subsidiaries), and in the case of Non-Qualified Options, shall have the meaning
of "subsidiary" in Rule 405 of Regulation C under the Securities Act of 1933, as
amended (generally, a controlled affiliate).
3. ADMINISTRATION
(a) The Plan shall be administered either by the Board or, in the discretion
of the Board, by a Committee; provided, however, that if a Committee has been
appointed by the Board, the Board may in its discretion, take any action
permitted to be taken by the Committee with respect to grants or other actions
under the Plan. The Board may from time to time appoint members of the Committee
in
2
<PAGE>
substitution for or in addition to members previously appointed and may fill
vacancies.
(b) Any action of the Committee with respect to the administration of
the Plan shall be taken by majority vote or by unanimous written consent of its
members.
(c) Subject to the provisions of the Plan, the Committee shall have
the authority to construe and interpret the Plan, to define the terms used
herein, to determine the Optionees, the time or times an Option may be exercised
and the number of shares which may be exercised at any one time, to determine
the other terms and conditions of Options granted hereunder, to prescribe, amend
and rescind rules and regulations relating to the Plan, to approve and determine
the duration of leaves of absence which may be granted to participants without
constituting a termination of their employment for purposes of the Plan, and to
make all other determinations necessary or advisable for the administration of
the Plan. The Committee's authority shall include, without limitation, the
right, in its discretion, to accelerate the exercisability of Options or reprice
or exchange Options with the consent of the Optionee. All determinations and
interpretations made by the Committee shall be conclusive and binding on all
Employees and on their guardians, legal representatives and beneficiaries.
(d) The Company will indemnify and hold harmless the members of the
Board and the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct and/or
criminal acts of such persons.
4. NUMBER OF SHARES SUBJECT TO PLAN
The stock to be offered under the Plan shall consist of up to 500,000
shares of the Company's Common Stock. If any Option granted hereunder shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for purposes of this
Plan.
5. ELIGIBILITY AND PARTICIPATION
(a) The Committee shall determine the Employees to whom Options shall
be granted, the time or times at which such Options shall be granted and the
number of shares to be subject to each Option. An Employee who has been granted
an Option may, if he is otherwise eligible, be granted an additional Option or
Options if the Committee shall so determine. An Employee may be granted
Incentive Options or Non-Qualified Options or both under the Plan.
(b) In no event shall the aggregate fair market value (determined as
of the time an Incentive Option is granted) of shares subject to Incentive
Options held by an Optionee (granted under the Plan or under any other plan of
the Company) that first
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become exercisable in any calendar year exceed $100,000. The portion of any
purported Incentive Option which exceeds such limitation shall be deemed to be a
Non-Qualified Option.
6. PURCHASE PRICE
The purchase price of each share covered by an Option shall be determined
by the Committee on the date of grant; provided, however, that (i) the purchase
price of each share covered by a Non-Qualified Option shall not be less than 85%
of the Fair Market Value of the Common Stock on the date of grant and (ii) the
purchase price of each share covered by an Incentive Option shall not be less
than 100% of the Fair Market Value Per Share of the Common Stock on the date of
grant; and provided, further, that if at the time an Incentive Option is granted
the Optionee owns or would be considered to own by reason of Section 424(d) of
the Code more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or Parent Corporation of the Company, the
purchase price of the shares covered by such Incentive Option shall not be less
than 110% of the Fair Market Value Per Share of the Common Stock on the date the
Incentive Option is granted.
7. DURATION OF OPTIONS
The expiration date of an Option shall not exceed 10 years from the date
on which the Option was granted, and shall be subject to earlier termination as
provided herein; provided, however, that if at the time an Incentive Option is
granted the Optionee owns or would be considered to own by reason of Section
424(d) of the Code more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or Parent Corporation of the
Company, such Incentive Option shall expire not more than 5 years from the date
the Incentive Option is granted.
8. EXERCISE OF OPTIONS
An Option shall be exercisable in installments or otherwise upon such
terms as the Committee shall in its discretion determine; provided, however,
that each Option shall be exercisable in installments of at least 20% per year
beginning one year after the grant date. An Optionee may purchase less than the
total number of shares for which the Option is exercisable, provided that the
exercise of an Option shall not include any fractional shares. As a condition to
the exercise, in whole or in part, of any Option, the Committee may in its sole
discretion require the Optionee to pay, in addition to the purchase price of the
shares covered by the Option, an amount equal to any federal, state and local
taxes that the Committee has determined are required to be paid in connection
with the exercise of such Option in order to enable the Company to claim a
deduction or otherwise. Furthermore, if any Optionee disposes of any shares of
stock acquired by exercise of an Incentive Option prior to the expiration of
either of the holding periods specified in Section 422(a)(1) of the Code, the
Optionee shall pay to the Company, or the Company shall have the right to
withhold from any payments to be made to the Optionee, an amount
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equal to any federal, state and local taxes that the Committee has determined
are required to be paid in connection with the exercise of such Option in order
to enable the Company to claim a deduction or otherwise.
9. METHOD OF EXERCISE
(a) To the extent that the right to purchase shares has accrued,
Options may be exercised from time to time by giving written notice to the
Company stating the number of shares with respect to which the Option is being
exercised, accompanied by payment in full of the purchase price for the number
of shares being purchased and, if applicable, any federal, state or local taxes
required to be paid in accordance with the provisions of Section 8 hereof.
(b) Payment of the purchase price for any shares pursuant to the
exercise of an Option may be made in cash or by check or, in connection with
subparagraphs (i) through (iv) where expressly approved by the Committee in
advance, in its discretion, and where permitted by law:
(i) by cancellation of indebtedness of the Company to the
Optionee;
(ii) by surrender of shares of Common Stock that have been owned
by the Optionee for at least six months;
(iii) by tender of a full recourse promissory note, which note
shall be secured by the shares being purchased, contain such terms as may
be approved by the Committee and bear interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the Code;
(iv) by waiver of compensation due or accrued to the Optionee
for services rendered;
(v) provided that a public market for the Company's Common
Stock exists:
(1) through a "same day sale" commitment from the
Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby the
Optionee irrevocably elects to exercise the Option and to sell a
portion of the shares so purchased to pay for the purchase price,
and whereby the NASD Dealer irrevocably commits to forward the
purchase price directly to the Company; or
(2) through a "margin" commitment from the Optionee and
a NASD Dealer whereby the Optionee irrevocably elects to exercise
the Option and to pledge the shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the purchase price, and whereby the NASD
Dealer
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irrevocably commits to forward the purchase price directly to the
Company; or
(vi) by any combination of the foregoing.
If payment is made with shares of Common Stock, the Optionee, or other
person entitled to exercise the Option, shall deliver to the Company
certificates representing the number of shares of Common Stock in payment for
the shares being purchased, duly endorsed for transfer to the Company and, if
requested by the Committee, a representation and warranty in writing that he has
good and marketable title to the shares represented by the certificate(s), free
and clear of all liens and encumbrances. The value of the shares of Common Stock
tendered in payment for the shares being purchased shall be their Fair Market
Value Per Share on the date of the Optionee's exercise.
(c) Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of the shares for such period as may be required
for it to comply, with reasonable diligence, with any applicable listing
requirements of any national securities exchange or any federal, state or local
law. If an Optionee, or other person entitled to exercise an Option, fails to
accept delivery of or fails to pay for all or any portion of the shares
requested in the notice of exercise, upon tender of delivery thereof, the
Committee shall have the right to terminate his Option with respect to such
shares.
10. NON-TRANSFERABILITY OF OPTIONS
No Option granted under the Plan shall be assignable or transferable by
the Optionee, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution, and shall be exercisable during his
lifetime only by the Optionee.
11. CONTINUANCE OF EMPLOYMENT
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any rights with respect to the continuation of
his status as an Employee of the Company or any Subsidiary or Parent Corporation
of the Company or interfere in any way with the right of the Company or any
Subsidiary or Parent Corporation of the Company at any time to terminate such
relationship or to increase or decrease the compensation of the Optionee from
the rate in existence at the time of the grant of an Option.
12. TERMINATION OF EMPLOYEE STATUS OTHER THAN BY DEATH OR PERMANENT
DISABILITY
If an Optionee ceases to be an Employee for any reason other than his
death or Permanent Disability, any Option granted to him under the Plan shall
terminate three months from the date on which such Optionee ceases to be an
Employee unless such Optionee has
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been rehired by the Company and is an Employee on such date. Until the
termination of the Option, the Optionee may exercise any Option granted to him
but only to the extent such Option was exercisable on the date he ceased to be
an Employee and provided that such Option has not expired or otherwise
terminated as provided herein. A leave of absence approved in writing by the
Committee shall not be deemed a termination for purposes of this Section, but no
Option may be exercised during any such leave of absence, except during the
first 90 days thereof. The fact that the Optionee may receive payment from the
Company or any Subsidiary of the Company after termination of Employee status
for vacation pay, for services rendered prior to termination, for salary in lieu
of notice, or for other benefits shall not affect the termination date.
13. DEATH OR PERMANENT DISABILITY OF OPTIONEE
If an Optionee shall die at a time when he is an Employee or if the
Optionee shall cease to be an Employee by reason of Permanent Disability, any
Option granted to him under this Plan shall terminate one year after the date of
his death or termination of Employee status due to Permanent Disability unless
by its terms the Option expires before such date or otherwise terminates as
provided herein, and such Option shall only be exercisable to the extent that it
would have been exercisable on the date of the Optionee's death or termination
due to Permanent Disability. In the case of death, the Option may be exercised
by the person or persons to whom the Optionee's rights under the Option shall
pass by will or by the laws of descent and distribution.
14. STOCK PURCHASE NOT FOR DISTRIBUTION
Each Optionee shall, by accepting the grant of an Option under the Plan,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon exercise of
the Option will be received and held without a view to distribution except as
may be permitted by the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. After each notice of exercise of any portion
of an Option, if requested by the Committee, the person entitled to exercise the
Option must agree in writing that the shares of stock are being acquired in good
faith without a view to distribution.
15. NO PRIVILEGES OF STOCK OWNERSHIP; REPORTS
The Company shall deliver annual financial statements to each Optionee.
No person entitled to exercise any Option granted under the Plan shall have any
of the rights or privileges of a shareholder of the Company with respect to any
shares of Common Stock issuable upon exercise of such Option until such person
has become the holder of record of such shares. No adjustment shall be made for
dividends or distributions of rights in respect of such shares if the record
date is prior to the date on which such person becomes the holder of record,
except as provided in Section 16 hereof.
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16. ADJUSTMENTS
(a) If the number of outstanding shares of Common Stock of the Company
are increased or decreased, or if such shares are exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, stock dividend, stock split,
combination of shares, or other similar transaction, the aggregate number of
shares of Common Stock subject to the Plan as provided in Section 4 hereof and
the shares of Common Stock subject to issued and outstanding Options under the
Plan shall be appropriately and proportionately adjusted by the Committee. Any
such adjustment in the outstanding Options shall be made without change in the
aggregate purchase price applicable to the unexercised portion of the Option but
with an appropriate adjustment in the price for each share or other unit of any
security covered by the Option.
(b) Notwithstanding the provisions of subsection (a) of this Section,
each outstanding Option shall terminate on the effective date of the dissolution
or liquidation of the Company or any reorganization, merger or consolidation
with one or more corporations or entities as a result of which the Company is
not the surviving corporation, or any sale of all or substantially all the
assets of the Company, or the sale (by merger or otherwise) of more than 80% of
the then outstanding Common Stock; provided, however, that unless the surviving
or acquiring corporation or other entity agrees to assume, or substitute
equivalent awards for, all outstanding Options, each Option shall become fully
exercisable subject to the provisions of Sections 12 and 13 during the 30-day
period immediately preceding the effective date of such event.
(c) Adjustments under this Section shall be made by the Committee,
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of stock
shall be issued under the Plan or in connection with any such adjustment.
17. AMENDMENT AND TERMINATION OF PLAN
(a) The Board of Directors of the Company may from time to time, with
respect to any shares at the time not subject to Options, suspend or terminate
the Plan or amend or revise the terms of the Plan; provided that any amendment
of the Plan shall be approved by the shareholders of the Company if the
amendment would (i)increase the number of shares of Common Stock which may be
issued under the Plan, except as permitted under the provisions of Section 16
hereof, or (ii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) No amendment, suspension or termination of the Plan shall, without
the consent of the Optionee, alter or impair any rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
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(c) The terms and conditions of any Option granted to an Optionee
under the Plan may be modified or amended only by a written agreement executed
by the Optionee and the Company.
18. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board of Directors
of the Company and approval by the Company's shareholders; provided, however,
that shareholder approval must occur no later than 12 months after the date of
adoption of the Plan by the Board of Directors.
19. TERM OF PLAN
No Option shall be granted pursuant to the Plan after 10 years from the
earlier of the date of adoption of the Plan by the Board of Directors of the
Company or the date of approval of the Plan by the Company's shareholders.
The Plan was adopted by the Board on June 29, 1999. The Plan was approved
by the shareholders on _______________, 1999.
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PERCEPTRONICS, INC.
1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of the Perceptronics, Inc. 1999 Stock Option Plan for Non-
Employee Directors (the "Plan") is to assist the Company in attracting,
motivating and retaining qualified non-employee directors by providing for or
increasing their proprietary interest in the Company through the grant of
options to acquire shares of Company Common Stock. The Plan provides for the
grant of options which do not qualify as "incentive stock options" within the
meaning of Section 422A of the Code (e.g. non-qualified stock options).
2. DEFINITIONS
Whenever used herein the following terms shall have the following
meanings, respectively:
a. "Board" shall mean the Board of Directors of the Company.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
c. "Common Stock" shall mean the Company's Common Stock, $.001 par
value per share, as described in the Company's Certificate of Incorporation, as
amended.
d. "Company" shall mean Perceptronics, Inc., a Delaware corporation.
e. "Fair Market Value Per Share" of the Company's Common Stock shall
mean the closing price of the Company's Common Stock or, if not available, the
mean between the bona fide bid and asked prices of the Common Stock on the date
of the grant of the Option. If there were no sales on the date of the grant of
an Option, the Fair Market Value Per Share shall be determined on the
immediately preceding date on which there were sales.
f. "Option" shall mean a non-qualified option granted pursuant to the
Plan.
g. "Optionee" shall mean any non-employee director who has been
granted an Option to purchase shares of Common Stock under the Plan.
<PAGE>
h. "Plan" shall mean the Perceptronics, Inc. 1999 Stock Option Plan
for Non-Employee Directors, as amended from time to time.
i. "Subsidiary" shall have the meaning set forth in Section 425(f) of
the Code.
3. ADMINISTRATION
Subject to the provisions of the Plan, the Board shall have the authority
to construe, interpret and administer the Plan, and to make all determinations
necessary or advisable for the administration of the Plan. All determinations
and interpretations made by the Board shall be final, conclusive and binding on
all Optionees and on their guardians, legal representatives and beneficiaries.
4. SHARES SUBJECT TO THE PLAN
Submit to adjustments in accordance herewith, the stock to be offered
under the Plan shall consist of up to 250,000 shares of the Company's Common
Stock. If any Option granted hereunder shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for purposes of this Plan.
If the number of outstanding shares of Common Stock of the Company are
increased or decreased, or if such shares are exchanged for a different number
or kind of shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, combination of
shares, or other similar transaction, the aggregate number of shares of Common
Stock subject to the Plan as provided herein and the shares of Common Stock
subject to issued and outstanding Options under the Plan shall be appropriately
and proportionately adjusted by the Board. Any such adjustment in the
outstanding Options shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option but with an appropriate
adjustment in the price for each share or other unit of any security covered by
the Option.
Adjustments under this Section shall be made by the Board, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan or in connection with any such adjustment.
5. ELIGIBILITY AND PARTICIPATION
Options may be granted only to non-employee directors of the Company.
Employees of the Company or any Subsidiary of the Company are not eligible to
receive Options under the Plan. For purposes
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of the Plan, directors who perform consulting services for the Company or any
Subsidiary are not deemed to be "employees" of the Company.
6. ANNUAL OPTION GRANTS
On the date this Plan is first approved by the Company's shareholders and
on April 1 of each year thereafter, each non-employee director on such date who
was a non-employee director of the Company for the entire immediately preceding
year shall automatically be granted an Option to purchase 12,500 shares of
Common Stock. Any person who is a non-employee director of the Company on the
applicable Option grant date but who was not a non-employee director during the
entire immediately preceding year shall be granted Options for a number of
shares determined by multiplying 12,500 by a fraction, the numerator of which is
the full number of months such person was a non-employee director during the
preceding year and the denominator of which is 12. Each Option shall be
evidenced by an Option Agreement duly executed on behalf of the Company and by
the Optionee. Each Option Agreement shall comply with and be subject to the
terms and conditions of the Plan. Any Agreement may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Board.
7. PURCHASE PRICE
The purchase price of each share covered by each Option shall be equal to
100% of the Fair Market Value Per Share of the Common Stock of the Company on
the date of Grant.
8. DURATION OF OPTIONS
Subject to prior termination in accordance with Section 12 hereof, the
expiration date of each Option shall be the first to occur of (i) five (5) years
from the date on which the Option was granted or (ii) on the effective date of
the dissolution or liquidation of the Company, or any reorganization, merger or
consolidation with one or more corporations or entities as a result of which the
Company is not the surviving corporation, or the sale of all or substantially
all of the assets of the Company or the sale (by merger or otherwise) of more
than 80% of the then outstanding Common Stock.
9. EXERCISE OF OPTIONS
a. Options shall be fully vested and immediately exercisable. An
Optionee may purchase less than the total number of shares for which the Option
is exercisable, provided that a partial exercise of an Option may not be for
less than 50 shares, unless the exercise is during the final year of the Option,
and shall not include any fractional shares. As a condition to the
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exercise, in whole or in part, of any Option, the Board may in its sole
discretion require the Optionee to pay, in addition to the purchase price of the
shares covered by the Option, an amount equal to any federal, state and local
taxes that the Board has determined are required to be paid in connection with
the exercise of such Option in order to enable the Company to claim a deduction
or otherwise.
b. Options may be exercised from time to time by giving written
notice to the Company stating the number of shares with respect to which the
Option is being exercised, accompanied by payment in full, by cash or check
payable to the order of the Company or the equivalent thereof acceptable to the
Company, of the purchase price for the number of shares being purchased and, if
applicable, any federal, state or local taxes required to be paid in accordance
with the provisions of Subsection (a) hereof.
c. Payment of the purchase price for the shares with respect to which
the Option is being exercised may be made in whole or in part by the surrender
of shares of Common Stock of the Company which have been owned by the Optionee
for at least six months. If payment is made with shares of Common Stock, the
Optionee, or other person entitled to exercise the Option, shall deliver to the
Company certificates representing the number of shares of Common Stock in
payment for the shares being purchased, duly endorsed for transfer to the
Company. If requested by the Board, prior to the acceptance of such certificates
in payment for such shares, the Optionee, or any other person entitled to
exercise the Option, shall supply the Board with a representation and warranty
in writing that he has good and marketable title to the shares represented by
the certificate(s), free and clear of all liens and encumbrances. The value of
the shares of Common Stock tendered in payment for the shares being purchased
shall be their Fair Market Value Per Share on the date of exercise of the
Option.
d. Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of the shares for such period as may be required
for it to comply, with reasonable diligence, with any applicable listing
requirements of any national securities exchange or any registration or
qualification requirements of any federal or state securities laws.
10. NON-TRANSFERABILITY OF OPTIONS
No Option granted under the Plan shall be assignable or transferable by
the Optionee, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution, and shall be exercisable during his
lifetime only by the Optionee.
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11. STOCK PURCHASE NOT FOR DISTRIBUTION
Each Optionee shall, by accepting the grant of an Option under the Plan,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon exercise of
the Option will be received and held without a view to distribution except as
may be permitted by the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. After each notice of exercise of any portion
of an Option, if requested by the Committee, the person entitled to exercise the
Option must agree in writing that the shares of stock are being acquired in good
faith without a view to distribution.
12. TERMINATION
Subject to the limitation stated in the last sentence of this Section 12,
Options shall terminate prior to the expiration of their term as follows: (i) if
an Optionee ceases to be a director of the Company for any reason other than
death or pursuant to Subsection (iii) hereof, he may at any time within three
months after such termination exercise his Option(s); (ii) if an Optionee dies
while serving as a director of the Company, or within three months after
termination of such status (other than termination pursuant to Subsection (iii)
hereof), his Option(s) may be exercised by the person or persons to whom his
rights under the Option shall pass by will or by the laws of descent and
distribution, for a period of one year after the date of death; and (iii) an
Optionee's Options shall immediately terminate on the date his directorship is
terminated on account of any act of (a) fraud or intentional misrepresentation,
or (b) embezzlement, misappropriation or conversion of assets or opportunities
of the Company or any direct or indirect majority owned subsidiary of the
Company. In no event may an Option be exercised to any extent by anyone after
the expiration of its term.
13. AMENDMENT AND TERMINATION OF PLAN
a. The Board may from time to time, with respect to any shares at the
time not subject to Options, suspend or terminate the Plan or amend or revise
the terms of the Plan; provided that any amendment to the Plan shall be approved
by the Company's shareholders if the amendment would (i) increase the number of
shares of Common Stock which may be issued under the Plan; or (ii) materially
modify the requirements as to eligibility for participation in the Plan.
b. No amendment, suspension or termination of the Plan shall, without
the consent of the Optionee, alter or impair any rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
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c. The terms and conditions of any Option granted to an Optionee
under the Plan may be modified or amended only by a written agreement executed
by the Optionee and the Company.
14. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board of Directors
of the Company and approval by the Company's shareholders and no Options may be
granted under the Plan until such shareholder approval has been obtained.
15. TERM OF PLAN
No Option shall be granted pursuant to the Plan after 10 years from the
earlier of the date of adoption of the Plan by the Board of Directors of the
Company or the date of approval of the Plan by the Company's shareholders.
The date of adoption of the Plan by the Board was June 29, 1999. The date
of the approval of the Plan by the shareholders was ____________, 1999.
6
