<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
COLORADO MEDTECH, 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):
/ / No fee required.
/x/ Fee computed on table below per Exchange Act Rules 14a-6(l)(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:
$125.00
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF COLORADO MEDTECH, INC.
TO BE HELD NOVEMBER 22, 1996
To the Shareholders of Colorado MEDtech, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Colorado
MEDtech, Inc., a Colorado corporation (the "Company"), will be held on
November 22, 1996 at 3:00 p.m. at the Hotel Boulderado, 2115 13th Street,
Boulder, Colorado for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Shareholders or until their respective successors are elected and
qualified;
2. To amend the Colorado Medtech, Inc. Stock Option Plan to increase the
number of shares reserved to 2,000,000 from 1,400,000 shares of the
Company's Common Stock for issuance thereunder;
3. To approve the Colorado Medtech, Inc. 1996 Employee Stock Purchase
Plan and reserve 240,000 shares of the Company's Common Stock for
issuance thereunder;
4. To transact any other business as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on October 8, 1996, has been fixed as the record date for
the determination of holders of Colorado MEDtech, Inc. Common Stock entitled to
notice of, and to vote at, the Annual Meeting, and only shareholders of record
at such time will be so entitled to vote.
In order for the proposals listed above to be approved, each proposal must be
approved by the affirmative vote of holders of a majority of shares, voting as a
group.
Whether or not you expect to attend the Annual Meeting, holders of Colorado
MEDtech, Inc. Common Stock should complete, date, and sign the enclosed form of
proxy card and mail it promptly in the enclosed envelope.
By Order of the Board of Directors
/s/ Bruce L. Arfmann
Bruce L. Arfmann
Secretary of the Corporation
Date: October 15, 1996
PLEASE SIGN AND RETURN THE ENCLOSED FORM OF PROXY PROMPTLY WHETHER OR NOT YOU
INTEND TO BE PRESENT AT THE ANNUAL MEETING. THE GIVING OF A PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
COLORADO MEDTECH, INC.
6175 Longbow Drive
Boulder, Colorado 80301
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 22, 1996
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Colorado MEDtech, Inc., a Colorado
corporation ("CMED" or the "Company"), for use at the Annual Meeting of
Shareholders of the Company to be held on November 22, 1996 at 3:00 p.m. at the
Hotel Boulderado, 2115 13th Street, Boulder, Colorado, and at any and all
adjournments of such meeting.
If the enclosed Proxy Card is properly executed and returned in time to be
voted at the meeting, the shares of Common Stock represented will be voted in
accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted FOR each of the proposals described
herein. Abstentions (proxies not returned) and broker non-votes will be treated
as shareholders absent from the Annual Meeting. The proxies will be tabulated
and votes counted by American Securities Transfer & Trust, Inc. It is
anticipated that this Proxy Statement and the accompanying Proxy Card will be
mailed to the Company's shareholders on or about October 15, 1996.
SHAREHOLDERS WHO EXECUTE PROXIES FOR THE ANNUAL MEETING MAY REVOKE THEIR
PROXIES AT ANY TIME PRIOR TO THEIR EXERCISE BY DELIVERING WRITTEN NOTICE OF
REVOCATION TO THE COMPANY, BY DELIVERING A DULY EXECUTED PROXY CARD BEARING A
LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
The costs of the meeting, including the costs of preparing and mailing the
Proxy Statement and Proxy, will be borne by the Company. Additionally, the
Company may use the services of its Directors, officers and employees to solicit
proxies, personally or by telephone, but at no additional salary or
compensation. The Company will also request banks, brokers, and others who hold
shares of Common Stock of the Company in nominee names to distribute proxy
soliciting materials to beneficial owners, and will reimburse such banks and
brokers for reasonable out-of-pocket expenses which they may incur in so doing.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting is
October 8, 1996. At the close of business on that day, there were 6,901,762
shares of no par value common stock (the "Common Stock") of the Company
outstanding and entitled to vote at the meeting.
<PAGE>
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding Common Stock is necessary to constitute a quorum for each matter
voted upon at the Annual Meeting. In deciding all questions, a holder of Common
Stock is entitled to one vote, in person or by proxy, for each share held in his
or her name on the record date. Abstentions and broker non-votes, if any, will
not be included in vote totals and, as such, will have no effect on any
proposal.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) FOR the election of each of the seven nominees named
herein for the office of director, (ii) FOR approval of an amendment to the
Colorado MEDtech, Inc. Stock Option Plan to increase the number of shares of
Common Stock reserved for issuance thereunder from 1,400,000 to 2,000,000, (iii)
FOR approval of the Colorado MEDtech, Inc. 1996 Employee Stock Purchase Plan and
to reserve 240,000 shares of Common Stock for issuance thereunder, and (iv) at
the discretion of the proxy holders, on any other matter that may properly come
before the meeting or any adjournment thereof.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter of business is
brought before the meeting, the proxy holders may vote the proxies at their
discretion. The directors do not know of any such other matter or business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock, as of August 31, 1996, by
each person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, certain executive officers, each director and director
nominee of the Company, and all directors and executive officers as a group.
Except as may be indicated in the footnotes to the table and subject to
applicable community property laws, the Company believes that each of such
persons has the sole voting and dispositive power over the shares held by him
except as otherwise indicated.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- ----------------- --------
Michael R. Barr 3,545,000(1) 39.62%
6175 Longbow Drive
Boulder, CO 80301
Vencor Investments, Inc. 3,500,000(2) 39.32%
c/o Greenbaum, Doll & McDonald
3300 First National Tower
Louisville, KY 40202-3197
John V. Atanasoff II 795,462(3) 10.42%
6175 Longbow Drive
Boulder, CO 80301
-2-
<PAGE>
Dean A. Leffingwell 596,999(4) 8.59%
6175 Longbow Drive
Boulder, CO 80301
Clifford W. Mezey 513,522(5) 7.26%
6175 Longbow Drive
Boulder, CO 80301
Vern D. Kornelsen 499,694(6) 7.19%
6175 Longbow Drive
Boulder, CO 80301
CMED Partners, Ltd. 408,413 5.92%
1700 Broadway, Suite 1450
Denver, CO 80290-1401
Robert L. Sullivan 380,000(7) 5.45%
6175 Longbow Drive
Boulder, CO 80301
Lockett E. Wood, Ph.D. 202,412(8) 2.90%
6175 Longbow Drive
Boulder, CO 80301
John E. Wolfe 180,000(9) 2.55%
6175 Longbow Drive
Boulder, CO 80301
Bruce L. Arfmann 75,290(10) 1.09%
6175 Longbow Drive
Boulder, CO 80301
Ira M. Langenthal 0 --
6175 Longbow Drive
Boulder, CO 80301
All Directors and Executive
Officers as a group (10 persons) 6,788,378 66.20%
- -------------------------
(1) Includes 1,500,000 shares and warrants to acquire 2,000,000 shares, which
are currently exercisable or become exercisable within 60 days, held by
Vencor Investments, Inc., a wholly-owned subsidiary of Vencor, Inc., of
which Mr. Barr is an officer and director. Mr. Barr disclaims beneficial
ownership of all such shares and warrants. Also includes warrants issued
to Mr. Barr to acquire 45,000 shares, which are currently exercisable or
become exercisable within 60 days.
-3-
<PAGE>
(2) Includes warrants to acquire 2,000,000 shares, which are currently
exercisable or become exercisable within 60 days.
(3) Includes 10,000 shares and warrants to acquire 20,000 shares, which are
currently exercisable or become exercisable within 60 days that are owned
by Mr. Atanasoff's sister, as to which securities he disclaims beneficial
ownership. Also includes options to purchase 596,667 shares and warrants
to purchase 112,530 shares, which are currently exercisable or become
exercisable within 60 days.
(4) Includes warrants to acquire 45,000 shares, which are currently exercisable
or become exercisable within 60 days.
(5) Includes 272,622 shares held by the Petsy G. Mezey Trust, of which Mr.
Mezey is a trustee. Also includes 7,000 shares owned by Mr. Mezey's wife
for the benefit of her grandchildren, as to which shares Mr. Mezey
disclaims beneficial ownership. Also includes warrants to acquire 175,600
shares, which are currently exercisable or become exercisable within 60
days.
(6) Includes 408,413 shares held by CMED Partners, Ltd., of which Mr. Kornelsen
is the general partner, and as to which he disclaims beneficial ownership.
Also includes 428 shares owned by Mr. Kornelsen's wife, as to which
securities he disclaims beneficial ownership. Also includes 33,108 shares
owned by the Saunders Construction Restated Profit Sharing Plan. Mr.
Kornelsen is the investment manager as to such shares held by the plan, and
disclaims beneficial ownership of shares owned by such plan. Also includes
warrants to acquire 45,000 shares, which are currently exercisable or
become exercisable within 60 days.
(7) Includes 300,000 shares held by CIBA Corning Diagnostics Corp., of which
Mr. Sullivan is an officer. Mr. Sullivan disclaims beneficial ownership of
all such shares. Also includes warrants to acquire 65,000 shares, which
are currently exercisable or become exercisable within 60 days.
(8) Includes 26,965 shares held by Dr. Wood's sister or brother-in-law in their
own names or as trustees for Dr. Wood's children. Dr. Wood disclaims
beneficial ownership of all such shares. Also includes options to purchase
66,725 shares, which are currently exercisable or become exercisable within
60 days.
(9) Includes warrants to acquire 145,000 shares, which are currently
exercisable or become exercisable within 60 days.
(10) Includes 15,449 shares owned by Mr. Arfmann's wife, as to which shares he
disclaims beneficial ownership. Also includes options to purchase 36,667
shares, which are currently exercisable or become exercisable within 60
days.
-4-
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Bylaws, the authorized number of directors of the Company
has been set at seven, and seven directors are to be elected at the meeting.
Nominees who are elected will be elected to hold office until the next annual
meeting of shareholders or until their successors are elected and qualified.
Proxy holders will not be able to vote the proxies held by them for more than
seven persons. If a quorum is present, the seven nominees having the highest
number of votes cast in favor of their election will be elected. Should any
nominee become unable or unwilling to accept nomination or election, the proxy
holders may vote the proxies for the election, in his stead, of any other person
the Board of Directors may recommend. Each nominee has expressed his intention
to serve the entire term for which election is sought.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH NOMINEE
FOR THE BOARD OF DIRECTORS.
The Board of Directors' nominees for the office of director are as follows:
Year First
Became a
Name Age Director
- ---- --- ----------
John V. Atanasoff II 61 1993
(N)
Dean A. Leffingwell 47 1977(1)
(N)(S)
Robert L. Sullivan 59 1985
(A)(C)
Clifford W. Mezey 67 1989(1)
(A)(C)(S)
John E. Wolfe 57 1993
(A)(S)
Michael R. Barr 47 1993
(S)
Ira M. Langenthal, Ph.D. 59 --
- ---------------------------
(A) Member of the Audit Committee
(C) Member of the Compensation Committee
(N) Member of the Nominating Committee
(S) Member of the Strategic Planning Committee
(1) Date became a director of RELA, Inc. ("RELA"). Became a director of the
Company in October 1992 in connection with the merger of RELA and the
Company.
-5-
<PAGE>
Mr. Atanasoff has been the Chief Executive Officer of the Company since
June 1993. From 1989 until January 1993, Mr. Atanasoff served as chief
executive officer of Cybernetics Products, Inc., a publicly-traded company that
develops and manufactures computer controlled equipment for the electronics
industry and computer graphic scanners and cameras for the motion picture and
audio visual markets. For more than five years prior to 1989, Mr. Atanasoff
held various senior management positions with the Fluid Technology Group of
EG&G, Inc. and Textron Systems (formerly AVCO Systems).
Mr. Leffingwell has been a director and CEO since June 1993 of Requisite,
Inc., a privately-held company that designs and develops object-oriented
software tools for software development and documentation. Mr. Leffingwell
served as Chairman and Vice President of Business Development of the Company
from October 1992 to June 30, 1993. Mr. Leffingwell also served as the Chief
Executive Officer of RELA from January 1992 to October 1992. From 1977 to 1991,
Mr. Leffingwell served as President and Chairman of RELA.
Mr. Sullivan has served as Senior Vice President-Finance since 1985 of CIBA
Corning Diagnostic Corp., a manufacturer and marketer of medical diagnostic
equipment and supplies. From 1962 to 1985, Mr. Sullivan held several operating
and financial positions with Corning Glass Works.
Prior to his retirement in 1994, Mr. Mezey was the majority owner and Chief
Executive Officer of Mezey-Puroll Automotive, Inc., an automotive manufacturer's
representative company in Michigan, for more than five years. He was the owner
and Chief Executive Officer of Interstate Industries, Inc., a manufacturer of
truck wiring harnesses in Michigan from 1981 to 1994. Mezey-Puroll Automotive,
Inc. served as an independent representative for RELA in Michigan, upon which it
received the standard commission paid by RELA to RELA's other manufacturer's
representatives. The independent representative agreement expired in October
1995.
Mr. Wolfe has served as President and Chief Executive Officer since 1986 of
Tytronics, Incorporated, a manufacturer and marketer of on-line liquid and gas
analyzers to the process and environmental industries. Prior to 1986, he held
various senior management positions with EG&G Sealol, Inc., Masoneilan
International, Inc. (Division of Studebaker Worthington), Litton Industries and
General Electric Company. Mr. Wolfe is a member of the board of directors of
Holometrix, Inc.
Mr. Barr is a founder of Vencor, Inc., an intensive care hospital company
located in Louisville, Kentucky. He is a physical therapist, certified
respiratory therapist and has served as Vice President - Operations and as a
member of the board of directors of Vencor, Inc., since 1985. From 1976 to
1985, he was Director of Rehabilitation at Rockcastle County Hospital in Mt.
Vernon, Kentucky.
Dr. Langenthal has been a corporate consultant and private investor since
1991. He joined Honeywell, Inc. in 1972 as a result of Honeywell's acquisition
of Signal Analysis Industries, a public company he co-founded. Dr. Langenthal
held various senior management positions at Honeywell, and from 1986 to 1990 was
Vice President/General Manager of Honeywell's Test Instruments Division, a
manufacturer of information storage products and systems. In 1990 this business
was part of a corporate spin-off forming a new company, Alliant Techsystems,
Inc., at which Dr. Langenthal continued to serve as Vice President/General
Manager until his departure in 1991.
-6-
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee, a Compensation Committee, a Nominating
Committee and a Strategic Planning Committee. The Audit Committee is
responsible for (i) reviewing the scope of the annual audit, (ii) reviewing with
the independent auditors the corporate accounting practices and policies, (iii)
reviewing with the independent auditors their final report, and (iv) being
available to the independent auditors during the year for consultation purposes.
The Audit Committee met four times in the fiscal year ended June 30, 1996. The
Compensation Committee determines the compensation of the officers of the
Company and performs other similar functions. The Compensation Committee met
four times in the fiscal year ended June 30, 1996. The Nominating Committee is
responsible for reviewing potential candidates for director and for the
recommendation of candidates to the Board. The Nominating Committee will accept
director nominations from shareholders at the Annual Meeting. The Nominating
Committee met once during the fiscal year ended June 30, 1996. The Strategic
Planning Committee is responsible for reviewing new product, licensing and
acquisition, as well as other strategic issues. The Strategic Planning
Committee met four times in the fiscal year ended June 30, 1996.
Directors are reimbursed for expenses incurred for attending any Board or
committee meeting. There is no family relationship between any current or
prospective director of the Company and any other current or prospective
director or executive officer of the Company.
During the fiscal year ended June 30, 1996, there were four meetings of the
Board of Directors. With the exception of directors Michael Barr and John
Wolfe, all directors attended at least 75% of the meetings of the Board and
committees of the Board on which they were members.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
of the Company. Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Company during the fiscal year ended June 30, 1996 and
Forms 5 and amendments thereto furnished to the Company with respect to the
fiscal year ended June 30, 1996, to the best of the Company's knowledge, the
Company's directors, officers and holders of more than 10% of its Common Stock
complied with all Section 16(a) filing requirements.
-7-
<PAGE>
EXECUTIVE OFFICERS
The following persons are executive officers of the Company:
Name Position
- ---- --------
John V. Atanasoff II Chairman, Chief Executive Officer and President
Bruce L. Arfmann Chief Financial Officer, Treasurer and Secretary
Lockett E. Wood, Ph.D. Vice President
Information concerning the business experience of Mr. Atanasoff is provided
under the section entitled "Election of Directors."
BRUCE L. ARFMANN, AGE 49. Mr. Arfmann has served as Chief Financial
Officer, Secretary and Treasurer of the Company since January 1991. Prior to
joining the Company, he was a partner with Arthur Andersen & Co. from 1982 to
1990, in its Denver and Phoenix offices.
LOCKETT E. WOOD, PH.D., AGE 56. Dr. Wood has served as a director of the
Company since its inception in 1977 through 1993. Dr. Wood also served as
President from the Company's inception through April 1986, at which time he
became Chairman of the Board of Directors, serving in that capacity through
September 1987. Dr. Wood again became President from April 1991 until October
1992, at which time he was appointed President of the Cybermedic Division of the
Company. Prior to founding the Company, Dr. Wood was with the National Bureau
of Standards of the U.S. Department of Commerce for 14 years.
The Chief Executive Officer is appointed by the Board of Directors and
serves at the Board's discretion. The Board of Directors, and such other
officers as the Board of Directors may authorize from time to time, may appoint
as additional officers one or more vice presidents, assistant secretaries,
assistant treasurers, and such other subordinate officers as the Board of
Directors or such other appointing officers deem necessary or appropriate. The
Chief Executive Officer shall have the right to reject the appointment of any
other officer appointed by the Board of Directors. If an additional officer is
appointed by an appointing officer, such additional officer serves at the
discretion of the appointing officer and the Board of Directors.
-8-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the cash compensation
earned for the fiscal years ended June 30, 1996, 1995 and 1994 by the Company's
Chief Executive Officer and by the highest compensated executive officers who
were serving as executive officers at the end of the 1996 fiscal year whose
individual total cash compensation for the 1996 fiscal year exceeded $100,000
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
------------------- ----------------------
Restricted
Name and Principal Stock Options/ All Other
Position Year Salary Bonus Awards SARS Compensation(1)
- ------------------ ---- ------ ----- ------ ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
John V. Atanasoff, II 1996 $140,000 $45,006 -0- 560,000 $4,828
Chief Executive Officer, 1995 92,965 26,749 -0- 40,000 2,869
President and Chairman 1994 104,783 18,291 -0- 270,000 1,464
Bruce L. Arfmann 1996 105,000 46,029 -0- 100,000 3,265
Chief Financial Officer 1995 98,083 23,634 -0- 20,000 1,455
1994 96,371 18,239 -0- 15,000 -0-
Lockett E. Wood 1996 93,488 30,054 -0- -0- 2,723
Vice President 1995 90,000 22,298(2) -0- -0- 2,118
1994 90,000 -0- -0- -0- 1,260
</TABLE>
- -------------------------
(1) Contributions to 401(k) Plan and, in 1995 and 1996 only, payments of life
insurance premiums on behalf of the Named Executive Officers.
(2) Includes a one-time payout of accrued vacation of $14,798.
-9-
<PAGE>
The following table presents information concerning individual grants of
options to purchase Common Stock of the Company made during the fiscal year
ended June 30, 1996 to each of the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of
Securities Percent of Total Exercise
Underlying Options/SARs or
Options/SARs Granted to Employees Base Price
Name Granted (#) in Fiscal Year ($/Sh.) Expiration Date
- -------------------- ------------ -------------------- ---------- ---------------
<S> <C> <C> <C> <C>
John V. Atanasoff II 300,000(1) 38.1% 1.84 6/21/2002(5)
260,000(2) 33.0% 3.25 5/31/2006
Bruce L. Arfmann 25,000(3) 3.2% 1.72 12/1/2000
75,000(4) 9.5% 2.38 2/16/2001(6)
Lockett E. Wood -0- -0- N/A N/A
</TABLE>
- -------------------------
(1) Options vest equally one-third each year commencing June 21, 1997.
(2) Options vest June 21, 2002.
(3) Options vest equally one-third each year commencing December 1, 1996.
(4) Options vest equally one-third each year commencing February 16, 1997.
(5) Options expire equally one-third each year commencing June 21, 2002.
(6) Options expire equally one-third each year commencing February 16, 2001.
The following table sets forth the fiscal year-end value of unexercised
options to purchase Common Stock of the Company for each Named Executive
Officer. No options or SARs were exercised by the Named Executive Officers
during the fiscal year ended June 30, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End (#) at FY-End ($)(1)
-------------------------- -----------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John V. Atanasoff II 583,333 586,667 $1,032,866 $393,534
Bruce L. Arfmann 21,666 113,334 35,832 99,768
Lockett E. Wood 62,800 15,700 125,600 31,400
</TABLE>
- -------------------------
(1) The fair market value of Company Common Stock at June 30, 1996, measured as
the mean of the closing bid and asked prices of the Common Stock on such date,
was $3.03 per share.
-10-
<PAGE>
DIRECTOR COMPENSATION
Directors of the Company who are not also employees of the Company are
reimbursed all out-of-pocket expenses incurred in attending each meeting or
committee meeting of the Board of Directors. In consideration of their service
as directors, non-employee directors receive warrants to purchase Common Stock
of the Company, which warrants generally vest over a two-year period subject to
continued service on the Board, and have an exercise price equal to the fair
market value of the Common Stock on the date of grant. In June 1992, non-
employee directors Vern Kornelsen, Robert Sullivan and Clifford Mezey were each
granted warrants to purchase 30,000 shares of Common Stock at $1.63 per share.
The warrants vested one-half on June 30, 1993 and one-half on June 30, 1994. In
June 1993, non-employee directors Dean Leffingwell, John Wolfe and Michael Barr
were each granted warrants to purchase 30,000 shares of Common Stock at $1.50
per share. The warrants vested one-half on June 30, 1994, and one-half on June
30, 1995. In June 1995, non-employee directors Michael Barr, Vern Kornelsen,
Dean Leffingwell, Clifford Mezey, Robert Sullivan and John Wolfe were each
granted warrants to purchase 30,000 shares of Common Stock at $1.59 per share.
These warrants vest one-half on June 30, 1996 and one-half on June 30, 1997.
All director warrants have a five-year term from their vesting date. In the
aggregate, director warrants to purchase 375,000 shares of Common Stock are
outstanding, and of such amount, warrants to purchase 105,000 shares expire in
February 1998, warrants to purchase 90,000 shares expire in November 1998, and
warrants to purchase 180,000 shares expire in June of 2000.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In June 1993, the Company entered into an employment agreement with John V.
Atanasoff II, Chief Executive Officer of the Company, which had a three-year
term. The Company and Mr. Atanasoff amended the employment agreement in
November 1995 and May 1996 to extend the term through June 2002. The agreement
fixes Mr. Atanasoff's compensation at $140,000. The agreement also provides for
incentive compensation in the form of an annual bonus, calculated as a
percentage of annual salary, which is based on the overall profitability of the
Company. From February 1994 to February 1995, Mr. Atanasoff agreed to a
voluntary salary reduction. In connection with and as a condition of the
employment agreement, Mr. Atanasoff executed a noncompetition agreement in which
he agreed not to engage in competitive activities for a period of two years
after his employment with the Company is terminated, whether voluntarily or
involuntarily. The Company also agreed to grant a nonqualified stock option to
purchase up to 300,000 shares of the Company's Common Stock at a purchase price
of $1.25 per share. In April 1994, the nonqualified option was converted to an
incentive stock option under identical price, terms and conditions. The option
vested 100,000 shares per year over three years and became fully exercisable in
June 1996. In consideration for and at the time of the November 1995 extension
of the employment agreement, the Company granted Mr. Atanasoff an incentive
stock option to purchase up to 300,000 shares of the Company's Common Stock at a
purchase price of $1.84 per share (the "300,000 Share Option"). The 300,000
Share Option vests in 100,000 share increments per year over three years. On
May 31, 1996, pursuant to the extended employment agreement, the Company granted
Mr. Atanasoff an incentive stock option to purchase 260,000 shares of Common
Stock at a purchase price of $3.25 per share (the "260,000 Share Option"; and
with the 300,000 Share Option, the "Options"). The 260,000 Share Option vests
in June 2002, subject to earlier vesting if the Company achieves certain stock
prices by September 2000. If the Company terminates the employment of Mr.
Atanasoff at any time prior to June 2002, no vesting of the Options shall occur
after the date of termination, but if Mr. Atanasoff is terminated for a reason
other than cause, Mr. Atanasoff will be entitled to receive a severance payment
amounting to all compensation remaining under the agreement;
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however, such payment shall not be less than one year's base salary if
termination occurs after June 21, 2001. The agreement provides for severance
pay equal to two years' base salary if termination at any time is the result of
a change in Company ownership greater than 30%. If Mr. Atanasoff terminates his
employment prior to June 1999, no further vesting of the Options shall occur,
and the unexercised portion of the Options, whether or not vested, shall
terminate. Subject to these restrictions, each portion of the vested Options
shall be exercisable for five years after the date such portion has vested.
In February 1994, the Company entered into separate employment agreements
with the Company's other officers, which agreements fix Mr. Arfmann's and Mr.
Wood's compensation (at June 30, 1996: $105,000 for Mr. Arfmann and $93,488 for
Mr. Wood). From February 1994 to February 1995, Mr. Arfmann agreed to a
voluntary salary reduction. The agreements provide for a severance payment
equal to one year's salary if the officer's employment is terminated as a result
of loss of officer status, relocation of the Company or for reasons other than
cause. The agreements provide for a severance payment equal to two year's
salary if within two years from the closing date of an acquisition of the
Company, the officer is terminated without cause. The agreements have no fixed
term and may be terminated by either party at any time.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; LEGAL PROCEEDINGS
During the fiscal year ended June 30, 1994, the Company sold 1,500,000
shares of Common Stock to a wholly-owned subsidiary of Vencor, Inc. ("Vencor"),
in two private placement transactions involving the sale of 500,000 and
1,000,000 shares, respectively. Pursuant to an Agreement to Purchase and Sell
Stock between the Company and Vencor dated December 3, 1993 (the "Purchase
Agreement"), the Company agreed to take steps necessary to elect a
representative of Vencor to the Company's Board of Directors and to use its best
efforts to obtain such election for so long as Vencor owns at least 500,000
shares of the Common Stock of the Company. In the second private placement
transaction, the Company issued to Vencor warrants to purchase 2,000,000 shares
of Company Common Stock, which expire May 12, 1999. Of these warrants,
1,000,000 became exercisable in May 1995 at $1.80 per share, and 1,000,000
became exercisable in May 1996 at $2.52 per share. In connection with the
second sale of stock to Vencor, the Company entered into a Standstill Agreement
with Vencor dated June 30, 1994 pursuant to which Vencor will not acquire more
than 40% of the Company's Common Stock for a period of five years. In addition,
the Company agreed to take steps necessary to elect an additional representative
of Vencor to the Company's Board of Directors and, for so long as Vencor owns at
least 1,500,000 shares of the Common Stock of the Company, to use its best
efforts to obtain the election of two Vencor representatives (including the
Vencor representative provided for in the Purchase Agreement). Vencor waived
its right to a second board seat for the 1995, 1996 and 1997 fiscal years. In
June 1994, the Company entered into a product development agreement with Vencor,
which provides for the Company to expend $800,000 over the term of the agreement
to develop mutually agreed upon products that Vencor will purchase exclusively
from the Company, while the Company will be unrestricted in its rights to sell
the products. The Company had sales to Vencor of approximately $381,000 and
$193,000 in 1996 and 1995, respectively. As of June 30, 1996, the Company had
an accounts receivable balance of $304,000 related to these sales. Michael R.
Barr, a director of the Company, is the Vice President - Operations and a
director of Vencor.
On October 19, 1992, the Company entered into a three-year sales
representative agreement with Mezey-Puroll Automotive, Inc. ("Mezey-Puroll"), a
manufacturer's representative agency whose majority shareholder was Clifford W.
Mezey, a director of the Company. The Agreement expired on October 19, 1995.
Such agreement provided territory and commission arrangements consistent with
agreements
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entered into with other sales representatives of the Company. Mezey-Puroll
filed a petition under Chapter 11 of the Federal Bankruptcy Code in February
1993, and was released from protection of the bankruptcy laws in August 1993.
At the time of the bankruptcy, Mr. Mezey was the Chief Executive Officer of
Mezey-Puroll.
PROPOSAL 2 - AMENDMENT OF STOCK OPTION PLAN
On September 27, 1996 the Board of Directors amended, subject to
shareholder approval, the Colorado MEDtech, Inc. Stock Option Plan (the "Plan").
The number of common shares available for issuance under the Plan was increased
to 2,000,000 common shares subject to adjustment for dividend, stock split or
other relevant changes in the Company's capitalization. At a Special Meeting of
Shareholders on May 14, 1995, the shareholders authorized 1,400,000 shares to be
reserved for issuance under the Plan. The Plan, as proposed to be amended, is
set forth as Exhibit A to this Proxy Statement.
The Board of Directors believes that the Plan has been of material benefit
to the Company by assisting the Company and its subsidiaries in attracting,
retaining and motivating key employees of proven ability. The Board of
Directors also believes that the best interests of the Company and its
shareholders require that the Company continue to be in a position to offer
options to present and prospective key personnel and expand its ability to offer
options to present and prospective consultants and to present and prospective
directors who are not employees of the Company or any subsidiary of the Company.
The purpose of the Plan is to promote the interests of the Company and its
shareholders by helping the Company and its subsidiaries attract, retain and
motivate key employees and consultants, including officers and directors who are
employees of or consultants to the Company or any of its subsidiaries, and non-
employee directors of the Company.
The Board of Directors adopted the Plan on June 25, 1992. The Plan was
approved by the shareholders at a Special Meeting of Shareholders held May 14,
1993.
As of August 31, 1996, options to purchase an aggregate of 1,424,572 shares
of Common Stock (net of options cancelled) had been granted pursuant to the Plan
and options to purchase 38,623 shares had been exercised. Options to purchase
1,385,949 shares remain outstanding and 24,572 shares are subject to the
approval of this plan amendment. As of August 31, 1996, the market value of all
shares of Common Stock subject to outstanding options was $4,074,690 (based upon
the average bid and asked prices as reported on the Nasdaq System on such date).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE PLAN
INCREASING THE NUMBER OF COMMON SHARES AVAILABLE FOR ISSUANCE THEREUNDER TO
2,000,000.
The amendment to the Plan will be approved if the number of votes cast
favoring the action exceed the number of votes cast opposing the action. Unless
otherwise specified, proxies solicited by the Board of Directors will be voted
FOR the adoption of the amendment to increase the number of shares reserved to
2,000,000 from 1,400,000 shares for issuance thereunder. The following
description of the Plan, as amended, is qualified in its entirety by reference
to the Plan included herewith as Exhibit A.
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SUMMARY OF THE PLAN
ADMINISTRATION. The Board of Directors is responsible for administering
the Plan. The Board of Directors has full authority, subject to the terms of
the Plan, to make all determinations under the Plan. The Board of Directors may
delegate administration of the Plan to a committee composed of two or more
directors, each of whom is a "non-employee director" as such term is defined in
Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). The
Company will indemnify each member of the Board of Directors for actions taken
under the Plan.
INCENTIVE AND NONSTATUTORY STOCK OPTIONS. The Board of Directors may grant
incentive stock options under the Plan and options which do not qualify as
incentive stock options ("nonstatutory stock options").
STOCK APPRECIATION RIGHTS AND SUPPLEMENTAL BONUSES. The Board of Directors
may grant Stock Appreciation Rights, which are the right to receive payment, in
shares of Common Stock, cash, or a combination thereof, of the redemption value
of a specified number of shares of Common Stock then purchasable under an
option. The Board of Directors may grant Supplemental Bonuses in connection
with an option or Stock Appreciation Right, in an amount not to exceed the
income tax liability incurred by the optionee upon the exercise of the option or
Stock Appreciation Right.
ELIGIBILITY. Employees of the Company and its subsidiaries, including
officers and directors who are employees of the Company or any subsidiary of the
Company, will be eligible to receive incentive stock options and nonstatutory
stock options under the Plan. As of June 30, 1996, the Company had
approximately 138 employees eligible to participate in the Plan. Members of the
Company's Board of Directors who are not employees of the Company or any of its
subsidiaries will be eligible to receive nonstatutory stock options under the
Plan. There are currently six (6) non-employee directors of the Company. The
benefits or amounts that will be received by or allocated to persons eligible to
receive options under the Plan are not determinable.
EXERCISE PRICE. The Plan provides that the exercise price under each
incentive stock option shallbe no less than 100% of the fair market value (110%
of the fair market value for employees owning more than 10% of the Company's
Common Stock) of the Common Stock on the day the option is granted. The exercise
price for each nonstatutory stock option granted under the Plan will be the
price established by the Board of Directors which normally is expected to be no
less than 100% of the fair market value on the date the option is granted. The
exercise price of an option is to be paid in cash or in such other consideration
as the Board deems acceptable, including the optionee's promissory note. The
Board may also permit a participant to surrender previously owned shares to the
Company, the fair market value of which would be applied to the option exercise
price.
NON-TRANSFERABILITY. All options granted under the Plan may be exercised
during the optionee's lifetime only by the optionee and are non-transferable
except by will or the laws of descent and distribution. Notwithstanding the
above, the Board may, at its discretion, permit the transfer of a nonstatutory
option.
EXERCISE. The duration of each option will be as specified by the Board
but will not exceed ten years from the date of grant (five years for incentive
stock options granted to holders of more than 10% of the Company's Common
Stock). The Board, at its discretion, may establish a vesting schedule for any
option granted under the Plan.
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EFFECT OF TERMINATION OF SERVICES. If an optionee's employment is
terminated because of the optionee's death or for a reason other than death,
exercisable options held by the optionee may be exercised no later than thirty
days following the optionee's termination or death. If the optionee is an
employee of the Company or a subsidiary of the Company and the termination is
due to the optionee's permanent and total disability, exercisable options held
by the optionee may be exercised for a period of three months following the
termination. In each case, the options may be exercised only to the extent
exercisable on the date of termination of employment and in no event is an
option exercisable after the termination date specified in the option grant.
STOCK DIVIDENDS AND STOCK SPLITS. The number, kind and price of the shares
subject to each outstanding option will be proportionately and appropriately
adjusted in the event of any stock dividend, stock split, recapitalization,
reclassification, or other similar change in the Company's outstanding
securities. The number of the shares of Common Stock of the Company reserved for
issuance pursuant to options granted under the Plan will be adjusted by the
Board of Directors for any such changes.
If within the duration of the stock option there is a corporate merger,
consolidation, acquisition of assets, or other reorganization ("Transaction")
and if such Transaction affects the Common Stock, the participant shall
thereafter be entitled to receive upon the exercise of his stock option those
shares or securities that he would have received had the stock option been
exercised prior to such Transaction and had the participant been a shareholder
of the Company with respect to such shares. If the Company is not the surviving
corporation in such a Transaction, all options outstanding under the Plan as of
the day before the Transaction, to the extent not exercised, shall become
exercisable in full, unless the Board of Directors shall have prescribed other
terms and conditions to the exercise of the options.
TERM OF PLAN; AMENDMENT. The Plan will terminate on June 24, 2002, ten
years from the date the Plan was adopted by the Board of Directors, or, if
earlier, upon the purchase of all Common Stock subject to the Plan pursuant to
the exercise of options granted under the Plan. Any options outstanding after
the termination of the Plan will remain in effect in accordance with their
terms. The Board of Directors may terminate or amend the Plan, except that the
Board may not, without shareholder approval, increase the number of shares of
Common Stock as to which options may be granted, materially increase the
benefits accruing to participants or materially modify the eligibility
requirements.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee will not realize taxable income upon
the grant of an incentive stock option under the Plan. In addition, an optionee
will not realize taxable income upon the exercise of an incentive stock option
if the optionee holds the shares acquired until at least one year after exercise
and, if later, until two years after the date of grant of option. The amount by
which the fair market value of the shares exceeds the option price at the time
of exercise generally is an item of tax preference for purposes of the
alternative minimum tax. If an optionee acquires stock through the exercise of
an incentive stock option under the Plan and subsequently sells the stock after
holding the stock for the period described above, the gain which is the
difference between the sale price of the stock and the option exercise price
will be taxed as capital gain. The gain will not be treated as ordinary income
except when the holding period requirements discussed above are not satisfied.
An incentive stock option does not entitle the Company to an income tax
deduction except to the extent that an optionee realizes ordinary income
therefrom.
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NONSTATUTORY OPTIONS. An optionee generally will not realize taxable
income upon the grant of a nonstatutory stock option. When an optionee exercises
a nonstatutory stock option, the optionee will realize taxable ordinary income
at that time equal to the difference between the option price and the fair
market value of the stock on the date of exercise.
An optionee will generally have a basis in stock acquired through the
exercise of a nonstatutory stock option under the Plan equal to the fair market
value of the stock on the date of exercise. If the optionee subsequently sells
the stock, the gain which is the difference between the sale price and the basis
will be taxed as capital gain.
Any ordinary income realized by an optionee upon exercise of a nonstatutory
stock option will be allowable to the Company as a deduction at the time it is
realized by the optionee.
Participants in the Plan should consult their own tax advisors to determine
the specific tax consequences of the Plan for them.
PROPOSAL 3 - ADOPTION OF 1996 EMPLOYEE STOCK PURCHASE PLAN
On September 27, 1996, the Board of Directors adopted, subject to
shareholder approval, the Company's 1996 Employee Stock Purchase Plan (the "1996
Purchase Plan") covering an aggregate 240,000 shares of the Company's no par
value Common Stock (subject to adjustments for any dividend, stock split or
other relevant changes to the Company's capitalization). The Company believes
that granting the opportunity to employees to acquire shares of its Common Stock
under the 1996 Purchase Plan is in the best interests of the Company. The 1996
Purchase Plan will be approved if the number of votes cast favoring the action
exceed the number of votes cast opposing the action. Unless otherwise
specified, proxies solicited by the Board of Directors will be voted for
approval of the 1996 Purchase Plan. A copy of the 1996 Purchase Plan is
attached hereto as Exhibit B.
THE BOARD OF DIRECTORS BELIEVES THE 1996 PURCHASE PLAN IS IN THE BEST INTERESTS
OF THE COMPANY AND ITS SHAREHOLDERS AND THEREFORE RECOMMENDS A VOTE FOR THE
ADOPTION OF THE 1996 PURCHASE PLAN.
The following is a summary of some of the principal terms of the 1996
Purchase Plan:
OFFERINGS; NUMBER AND PURCHASE PRICE OF SHARES. The 1996 Purchase Plan
consists of three (3) annual offerings of 80,000 shares of Common Stock each.
The number of shares available for each payment period may be increased, at the
election of the Committee of the Board of Directors, which administers the 1996
Purchase Plan. The first "Payment Period" under the 1996 Purchase Plan will
commence on January 1, 1997, and will terminate December 31, 1997. The Company
will grant to each participant an option to purchase on the last day of the
Payment Period, the number of full shares of Common Stock as his/her accumulated
payroll deductions on the last day of the Payment Period will pay for at the
Option Price, provided that the employee remains eligible to participate in the
1996 Purchase Plan throughout the Payment Period. The Option Price for each
Payment Period is the lesser of 85% of the fair market value of the Common Stock
on the first business day of the Payment Period or 85% of the fair market value
of the Common Stock on the last day of the Payment Period. Fair market value is
the average of the closing bid and asked prices of the Common Stock. An
employee may elect to have up to 10% withheld from his or her regular salary for
this purpose.
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ELIGIBILITY. With certain limited exceptions in the case of employees
already holding 5% or more of the total voting power of capital stock of the
Company, each employee of the Company having at least six (6) months of
continuous service as of the beginning of a Payment Period and who ordinarily
works 20 or more hours per week and more than five months per year is eligible
to participate in the 1996 Purchase Plan. As of August 31, 1996, approximately
128 employees were eligible to participate in the 1996 Purchase Plan.
AMENDMENT, TERMINATION AND ADMINISTRATION. The Board of Directors of the
Company may amend the 1996 Purchase Plan at any time. However, no such
amendment shall be made without prior approval of the shareholders of the
Company if such amendment would (a) except as provided in Articles 3 and 4 of
the Plan, increase the number of shares of Common Stock to be offered under the
1996 Purchase Plan, or (b) change the class of employees eligible to participate
in the 1996 Purchase Plan or (c) cause the 1996 Purchase Plan to no longer
comply with Rule 16b-3 under the Exchange Act or with Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The 1996 Purchase Plan
is administered by the Board of Directors. The Board of Directors may delegate
administration of the 1996 Purchase Plan to a committee composed of two or more
directors, each of whom is a "non-employee director" as such term is defined in
Rule 16b-3 under the Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES. The Company has determined the following
general tax consequences of the 1996 Purchase Plan. The 1996 Purchase Plan is
intended to qualify as an "employee stock purchase plan" as defined in Section
423 of the Code.
Transfers of stock to an employee under the 1996 Purchase Plan receive tax-
favored treatment if (a) the employee is an employee of the Company at all times
during the relevant Payment Period, and (b) the employee makes no disposition of
the stock within two years after the first business day of the relevant Payment
Period. No income results for the employee on the transfer of the stock, the
Company has no trade or business deduction on the transfer, and the Company is
not treated as receiving any amount other than the Option Price for the stock.
If the employee disposes of the stock before meeting the holding period
requirement, the employee has ordinary income for services and the Company has a
deduction to the extent of any difference between the stock's value on
disposition and the Option Price. The income is treated as received for the tax
year of the employee when the disposition occurs. Similarly, the deduction is
treated as allowable for the tax year of the Company when the disposition
occurs.
If no disposition is made until the holding period requirement is met, the
employee must report ordinary income in an amount equal to the lesser of (a) the
excess of the fair market value of the stock at the time of such disposition
over the Option Price, and (b) the excess of the fair market value of the stock
at the time of purchase over the Option Price. Any further gain on disposition
is taxed as long-term capital gain. If the price received on disposition is
less than the Option Price, the employee will report the loss as a long-term
capital loss. The Company gets no deduction when the holding period is met,
even if ordinary income results to the employee.
The employee must report as ordinary income all amounts withheld from
regular base pay in each Payment Period pursuant to an Authorization signed by
him, as well as any interest earned on such funds while they are held by the
Company on behalf of the employee.
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For tax years beginning after 1996, ordinary income will be taxed at three
rates: 15%, 28% and 31%. The maximum tax rate imposed on net capital gain is
28%. Net capital gain means the excess of net long-term capital gain over net
short-term capital loss. Net capital losses can be deducted against other
income, subject to a limitation of $3,000 annually.
Employees who participate in the 1996 Purchase Plan should consult their
own tax advisors to determine the specific tax consequences of the 1996 Purchase
Plan for them.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material in connection with the 1997 annual meeting of
shareholders of the Company must be submitted in accordance with the rules of
the Securities and Exchange Commission and received by the Secretary of the
Company at the Company's principal executive offices no later than the close of
business on July 24, 1997.
OTHER MATTERS
All information contained in this Proxy Statement relating to the
occupations, affiliations and securities holdings of directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than 5% of the Company's
Common Stock is based upon information contained in reports filed by such owner
with the Securities and Exchange Commission.
The Company's independent public accountants for the fiscal years 1994,
1995 and 1996 are Arthur Andersen LLP. Representatives of such firm are
expected to be present at the annual meeting, will have the opportunity to make
a statement if they desire to do so and are expected to be available to respond
to appropriate questions.
The Annual Report to Shareholders of the Company for the fiscal year ended
June 30, 1996, which includes financial statements and accompanies this Proxy
Statement, does not form any part of the material for the solicitation of
proxies.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-KSB, INCLUDING THE FINANCIAL STATEMENTS, FOR THE FISCAL YEAR ENDED JUNE 30,
1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 TO ANY SHAREHOLDER (INCLUDING ANY
BENEFICIAL OWNER) UPON WRITTEN REQUEST TO: BRUCE L. ARFMANN, CHIEF FINANCIAL
OFFICER, COLORADO MEDTECH, INC., 6175 LONGBOW DRIVE, BOULDER, COLORADO 80301. A
COPY OF THE EXHIBITS TO SUCH REPORT WILL BE FURNISHED TO ANY SHAREHOLDER UPON
WRITTEN REQUEST THEREFOR AND PAYMENT OF A NOMINAL FEE.
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COLORADO MEDTECH, INC. EXHIBIT A
STOCK OPTION PLAN
I. PURPOSE
The COLORADO MEDTECH, INC. Stock Option Plan (the "Plan") provides for the
grant of Stock Options, Stock Appreciation Rights and Supplemental Bonuses to
Employees and non-employee directors of Colorado MEDtech, Inc. (the "Company"),
and such of its subsidiaries (as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code")) as the Board of Directors of the
Company (the "Board") shall from time to time designate ("Participating
Subsidiaries"), in order to advance the interests of the Company and its
Participating Subsidiaries through the motivation, attraction and retention of
their respective Employees and non-employee directors.
II. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
The Stock Options granted under the Plan may be either:
(a) Incentive Stock Options ("ISOs") which are intended to be "Incentive
Stock Options" as that term is defined in Section 422 of the Code; or
(b) Nonstatutory Stock Options ("NSOs") which are intended to be options
that do not qualify as "Incentive Stock Options" under Section 422 of the Code.
All Stock Options shall be ISOs unless the Option Agreement clearly
designates the Stock Options granted thereunder, or a specified portion thereof,
as NSOs. Subject to the other provisions of the Plan, a Participant may receive
ISOs and NSOs at the same time, provided that the ISOs and NSOs are clearly
designated as such, and the exercise of one does not affect the exercise of the
other.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.
III. ADMINISTRATION
3.1 COMMITTEE. The Plan shall be administered by the Board or by a
committee composed solely of two or more directors ("Committee") each of whom is
a Non-Employee Director. The Committee or the Board, as the case may be, shall
have full authority to administer the Plan, including authority to interpret and
construe any provision of this Plan and any Stock Option, Stock Appreciation
Right or Supplemental Bonus granted hereunder, and to adopt such rules and
regulations for administering the Plan as it may deem necessary in order to
comply with the requirements of the Code, or in order that Stock Options that
are intended to be ISOs will be classified as incentive stock options under the
Code, or in order to conform to any regulation or to any change in any law or
regulation applicable thereto. The Committee or the Board may delegate any of
its responsibilities under this Plan, other than its responsibility to grant
Stock Options, to determine whether the Stock Appreciation Rights or
Supplemental Bonuses, if any, payable to a Participant shall be paid in cash, in
shares of Common Stock or a combination thereof, or to interpret and construe
this Plan. The Board of Directors may reserve to itself any of the authority
granted to the Committee as set forth herein, and it may perform and discharge
all of the functions and responsibilities of the Committee at any time that a
duly constituted Committee is not appointed and serving. All references in this
Plan to the "Committee" shall be deemed to refer to the Board of Directors
whenever the Board is discharging the powers and responsibilities of the
<PAGE>
Committee, and to any special committee appointed by the Board to administer
particular aspects of this Plan.
3.2 ACTIONS OF THE COMMITTEE. All actions taken and all interpretations
and determinations made by the Committee in good faith (including determinations
of Fair Market Value) shall be final and binding upon all Participants, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan, and all members of the Committee shall, in
addition to their rights as directors, be fully protected by the Company with
respect to any such action, determination or interpretation. Rule 16b-3 under
the Securities Exchange Act of 1934 (the "Exchange Act") provides that the grant
of a stock option to a director or officer of a company will be exempt from the
provisions of Section 16(b) of the Exchange Act if the conditions set forth in
said Rule are satisfied. Unless otherwise specified by the Committee, grants of
Stock Options hereunder to and exercises of Stock Options by individuals who are
officers or directors of the Company shall be made in a manner that satisfies
the conditions of said Rule.
IV. DEFINITIONS
4.1 "STOCK OPTION". A Stock Option is the right granted under the Plan
to purchase, at such time or times and at such price or prices ("Option Price")
as are determined by the Committee, the number of shares of Common Stock
determined by the Committee.
4.2 "STOCK APPRECIATION RIGHT". A Stock Appreciation Right is the right
to receive payment, in shares of Common Stock, cash or a combination of shares
of Common Stock and cash, of the Redemption Value of a specified number of
shares of Common Stock then purchasable under a Stock Option.
4.3 "REDEMPTION VALUE". The Redemption Value of shares of Common Stock
purchasable under a Stock Option shall be the amount, if any, by which the Fair
Market Value of one share of Common Stock on the date on which the Stock Option
is exercised exceeds the Option Price for such share.
4.4 "COMMON STOCK". A share of Common Stock means a share of authorized
but unissued or reacquired Common Stock (no par value per share) of the Company.
4.5 "FAIR MARKET VALUE". If the Common Stock is not traded publicly, the
Fair Market Value of a share of Common Stock on any date shall be determined, in
good faith, by the Committee after such consultation with outside legal,
accounting and other experts as the Committee may deem advisable, and the
Committee shall maintain a written record of its method of determining such
value. If the Common Stock is traded publicly, the Fair Market Value of a share
of Common Stock on any date shall be the average of the representative closing
bid and asked prices, as quoted by the National Association of Securities
Dealers through NASDAQ (its automated system for reporting quotes), for the date
in question or, if the Common Stock is listed on the NASDAQ National Market
System or is listed on a national stock exchange, the officially quoted closing
price on NASDAQ or such exchange, as the case may be, on the date in question.
4.6 "EMPLOYEE". An Employee is an employee of the Company or any
Participating Subsidiary.
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4.7 "PARTICIPANT". A Participant is a person to whom a Stock Option,
Stock Appreciation Right or Supplemental Bonus is granted.
4.8 "NON-EMPLOYEE DIRECTOR". A Non-Employee Director is a person who
satisfies the definition of a "non-employee director" set forth in Rule 16b-3
under the Exchange Act or any successor rule or regulation, as it may be amended
from time to time.
4.9 "SUPPLEMENTAL BONUS". A Supplemental Bonus is the right to receive
payment, in shares of Common Stock, cash or a combination of shares of Common
Stock and cash, of an amount determined under Section 7.7.
V. ELIGIBILITY AND PARTICIPATION
Grants of Stock Options, Stock Appreciation Rights and Supplemental Bonuses
may be made to Employees or non-employee directors of the Company or any
Participating Subsidiary; PROVIDED, HOWEVER, that only Employees, including
directors of the Company who are also Employees, shall be eligible to receive
ISOs. The Committee shall from time to time determine the Participants to whom
Stock Options shall be granted, the number of shares of Common Stock subject to
each Stock Option to be granted, the Option Price of such Stock Options and
other terms and provisions of such Stock Options, all as provided in this Plan.
The Option Price of any ISO shall be not less than the Fair Market Value of a
share of Common Stock on the date on which the Stock Option is granted, but the
Option Price of an NSO may be less than the Fair Market Value on the date the
NSO is granted if the Committee so determines. If an ISO is granted to an
Employee who then owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company, the Option Price of such ISO shall be at least 110%
of the Fair Market Value of the Common Stock subject to the ISO at the time such
ISO is granted, and such ISO shall not be exercisable after five years after the
date on which it was granted. Each Stock Option shall be evidenced by a written
agreement ("Option Agreement") containing such terms and provisions as the
Committee may determine, subject to the provisions of this Plan.
VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1 MAXIMUM NUMBER. The maximum aggregate number of shares of Common
Stock that may be made subject to Stock Options shall be 2,000,000 authorized
but unissued shares. The aggregate Fair Market Value (determined as of the time
the ISO is granted) of the Common Stock as to which all ISOs granted to an
Employee may first become exercisable in a particular calendar year may not
exceed $100,000. If any shares of Common Stock subject to Stock Options are not
purchased or otherwise paid for before such Stock Options expire, such shares
may again be made subject to Stock Options.
6.2 CAPITAL CHANGES. In the event any changes are made to the shares of
Common Stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend in excess of ten percent (10%) at any single
time, stock split, combination of shares, exchange of shares, change in
corporate structure or otherwise), appropriate adjustments shall be made in: (i)
the number of shares of Common Stock theretofore made subject to Stock Options,
and in the purchase price of said shares; and (ii) the aggregate number of
shares which may be made subject to Stock Options. If any of the foregoing
adjustments shall result in a fractional share, the fraction shall be
disregarded, and the
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Company shall have no obligation to make any cash or other payment with respect
to such a fractional share.
VII. EXERCISE OF STOCK OPTIONS
7.1 TIME OF EXERCISE. Subject to the provisions of the Plan, including
without limitation Section 7.5, the Committee, in its discretion, shall
determine the time when a Stock Option, or a portion of a Stock Option, shall
become exercisable, and the time when a Stock Option, or a portion of a Stock
Option, shall expire. Such time or times shall be set forth in the Option
Agreement evidencing such Stock Option. A Stock Option shall expire, to the
extent not exercised, no later than the tenth anniversary of the date on which
it was granted. The Committee may accelerate the vesting of any Participant's
Stock Option by giving written notice to the Participant. Upon receipt of such
notice, the Participant and the Company shall amend the Option Agreement to
reflect the new vesting schedule. The acceleration of the exercise period of a
Stock Option shall not affect the expiration date of that Stock Option.
7.2 EXCHANGE OF OUTSTANDING STOCK. The Committee, in its sole discretion,
may permit a Participant to surrender to the Company shares of Common Stock
previously acquired by the Participant as part or full payment for the exercise
of a Stock Option. Such surrendered shares shall be valued at their Fair Market
Value on the date of exercise.
7.3 USE OF PROMISSORY NOTE; EXERCISE LOANS. The Committee may, in its
sole discretion, impose terms and conditions, including conditions relating to
the manner and timing of payments, on the exercise of Stock Options. Such terms
and conditions may include, but are not limited to, permitting a Participant to
deliver to the Company his promissory note as full or partial payment for the
exercise of a Stock Option. The Committee, in its sole discretion, may
authorize the Company to make a loan to a Participant in connection with the
exercise of Stock Options, or authorize the Company to arrange or guarantee
loans to a Participant by a third party.
7.4 STOCK RESTRICTION AGREEMENT. The Committee may provide that shares of
Common Stock issuable upon the exercise of a Stock Option shall, under certain
conditions, be subject to restrictions whereby the Company has a right of first
refusal with respect to such shares or a right or obligation to repurchase all
or a portion of such shares, which restrictions may survive a Participant's term
of employment with the Company. The acceleration of time or times at which a
Stock Option becomes exercisable may be conditioned upon the Participant's
agreement to such restrictions.
7.5 TERMINATION OF EMPLOYMENT BEFORE EXERCISE. If a Participant's
employment with the Company or a Participating Subsidiary shall terminate for
any reason other than the Participant's disability, any Stock Option granted to
the Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall remain exercisable after the termination of his employment
for a period of 30 days (but, in the case of an ISO, in no event beyond ten
years from the date of grant of the ISO). If the Participant's employment is
terminated because the Participant is disabled within the meaning of Section
22(e)(3) of the Code, any Stock Option granted to the Participant, to the extent
then exercisable under the applicable Option Agreement(s), shall remain
exercisable after the termination of his employment for a period of three months
(but, in the case of an ISO, in no event beyond ten years from the date of grant
of the ISO). If the Stock Option is not exercised during the applicable period,
it shall be deemed to have been forfeited and of no further force or effect.
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7.6 DISPOSITION OF FORFEITED STOCK OPTIONS. Any shares of Common Stock
subject to Stock Options forfeited by a Participant shall not thereafter be
eligible for purchase by the Participant but may be made subject to Stock
Options granted to other Participants.
7.7 GRANT OF SUPPLEMENTAL BONUSES. The Committee, either at the time of
grant or at any time prior to exercise of any Stock Option or Stock Appreciation
Right, may provide for a Supplemental Bonus from the Company or Participating
Subsidiary in connection with a specified number of shares of Common Stock then
purchasable, or which may become purchasable, under a Stock Option, or a
specified number of Stock Appreciation Rights which may be or become
exercisable. Such Supplemental Bonus shall be payable upon the exercise of the
Stock Option or Stock Appreciation Right with regard to which such Supplemental
Bonus was granted. A Supplemental Bonus shall not exceed the amount necessary
to reimburse the Participant for the income tax liability incurred by him upon
the exercise of the Stock Option or upon the exercise of such Stock Appreciation
Right, calculated using the maximum combined federal and applicable state income
tax rates then in effect and taking into account the tax liability arising from
the Participant's receipt of the Supplemental Bonus. The Committee may, in its
discretion, elect to pay any part or all of the Supplemental Bonus in: (i) cash;
(ii) shares of Common Stock; or (iii) any combination of cash and shares of
Common Stock. The provisions of Section 8.3 shall apply to the giving of
notice, the determination of the number of shares to be delivered, and the time
for delivering shares. In applying Section 8.3, the Supplemental Bonus shall be
treated as if it were a Stock Appreciation Right that the Participant exercised
on the day the Supplemental Bonus became payable. Shares of Common Stock issued
pursuant to this Section 7.7 shall not be deemed to have been issued upon the
exercise of a Stock Option for purposes of the limitations imposed by Section
6.1 of the Plan.
VIII. STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee may, from time to
time, grant Stock Appreciation Rights to a Participant with respect to not more
than the number of shares of Common Stock which are, or may become, purchasable
under any Stock Option held by the Participant. The Committee may, in its sole
discretion, specify the terms and conditions of such rights, including without
limitation the time period or time periods during which such rights may be
exercised and the date or dates upon which such rights shall expire and become
void and unexercisable; provided, however, that in no event shall such rights
expire and become void and unexercisable later than the time when the related
Stock Option is exercised, expires or terminates. Each Participant to whom
Stock Appreciation Rights are granted shall be given written notice advising him
of the grant of such rights and specifying the terms and conditions of the
rights, which shall be subject to all the provisions of this Plan.
8.2 EXERCISE OF STOCK APPRECIATION RIGHTS. Subject to Section 8.3, and in
lieu of purchasing shares of Common Stock upon the exercise of a Stock Option
held by him, a Participant may elect to exercise the Stock Appreciation Rights,
if any, he has been granted and receive payment of the Redemption Value of all,
or any portion, of the number of shares of Common Stock subject to such Stock
Option with respect to which he has been granted Stock Appreciation Rights;
provided, however, that the Stock Appreciation Rights may be exercised only when
the Fair Market Value of the Common Stock subject to such Stock Option exceeds
the exercise price of the Stock Option. A Participant shall exercise his Stock
Appreciation Rights by delivering a written notice to the Committee specifying
the number of shares with respect to which he exercises Stock Appreciation
Rights and agreeing to surrender the rights to purchase an equivalent number of
shares of Common Stock subject to his Stock Option. If a Participant exercises
Stock Appreciation Rights, payment of his Stock Appreciation Rights shall be
made
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in accordance with Section 8.3 on or before the 90th day after the date of
exercise of the Stock Appreciation Rights.
8.3 FORM OF PAYMENT. If a Participant elects to exercise Stock
Appreciation Rights as provided in Section 8.2, the Committee may, in its
absolute discretion, elect to pay any part or all of the Redemption Value of the
shares with respect to which the Participant has exercised Stock Appreciation
Rights in: (i) cash; (ii) shares of Common Stock; or (iii) any combination of
cash and shares of Common Stock. The Committee's election pursuant to this
Section 8.3 shall be made by giving written notice to the Participant within
said 90-day period, which notice shall specify the portion which the Committee
elects to pay in cash, shares of Common Stock or a combination thereof. In the
event any portion is to be paid in shares of Common Stock, the number of shares
to be delivered shall be determined by dividing the amount which the Committee
elects to pay in shares of Common Stock by the Fair Market Value of one share of
Common Stock on the date of exercise of the Stock Appreciation Rights. Any
fractional share resulting from any such calculation shall be disregarded. Said
shares, together with any cash payable to the Participant, shall be delivered
within said 90-day period.
IX. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company, or any Participating Subsidiary, nor
shall it interfere in any way with the right of the Company, or any such
Participating Subsidiary, to discharge the Participant at any time for any
reason whatsoever, with or without cause. Nothing in this Article IX shall
affect any rights or obligations of the Company or any Participant under any
written contract of employment.
X. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option. Except as provided in Section
6.2, no adjustment shall be made in the number of shares of Common Stock issued
to a Participant, or in any other rights of the Participant upon exercise of a
Stock Option by reason of any dividend, distribution or other right granted to
shareholders for which the record date is prior to the date of exercise of the
Participant's Stock Option.
XI. ASSIGNABILITY
No Stock Option, Stock Appreciation Right or Supplemental Bonus right
granted under this Plan, nor any other rights acquired by a Participant under
this Plan, shall be assignable or transferable by a Participant, other than by
will or the laws of descent and distribution or, in the case of an NSO, pursuant
to a qualified domestic relations order as defined by the Code, Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
Notwithstanding the preceding sentence, the Committee may, in its sole
discretion, permit the assignment or transfer of an NSO, Stock Appreciation
Right or Supplemental Bonus right granted under this Plan by a Participant, and
the exercise thereof by a person other than such Participant, on such terms and
conditions as the Committee in its sole discretion may determine. Any such
terms shall be set forth in the Option Agreement. In the event of a
Participant's death, the Stock Option or any Stock Appreciation Right or
Supplemental Bonus right may be exercised by the Personal Representative of the
Participant's estate or, if no Personal Representative has been appointed, by
the successor or successors in interest determined under the Participant's will
or under the applicable laws of descent and distribution. The terms of any
rights under this Plan in the hands of a
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transferee or assignee shall be determined as if held by the Participant and
shall be of no greater extent or term than if the transfer or assignment had not
taken place.
XII. MERGER OR LIQUIDATION OF THE COMPANY
If the Company or its shareholders enter into an agreement to dispose of
all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, all Stock Options
outstanding under the Plan as of the day before the consummation of such sale,
liquidation, merger or reorganization, to the extent not exercised, shall for
all purposes under this Plan become exercisable in full as of such date even
though the dates of exercise established pursuant to Section 7.1 have not yet
occurred, unless the Board shall have prescribed other terms and conditions to
the exercise of the Stock Option, or otherwise modified the Stock Options.
XIII. AMENDMENT
The Board may from time to time alter, amend, suspend or discontinue the
Plan, including, where applicable, any modifications or amendments as it shall
deem advisable in order that ISOs will be classified as incentive stock options
under the Code, or in order to conform to any regulation or to any change in any
law or regulation applicable thereto; provided, however, that no such action
shall adversely affect the rights and obligations with respect to Stock Options
at any time outstanding under the Plan; and provided further that no such action
shall, without the approval of the shareholders of the Company, (i) increase the
maximum number of shares of Common Stock that may be made subject to Stock
Options (unless necessary to effect the adjustments required by Section 6.2), or
(ii) materially modify the requirements as to eligibility for participation in
the Plan.
XIV. REGISTRATION OF OPTIONED SHARES
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), or unless, in
the opinion of counsel to the Company, the proposed purchase of such optioned
shares would be exempt from the registration requirements of the 1933 Act and
from the registration or qualification requirements of applicable state
securities laws.
XV. WITHHOLDING TAXES
The Company or Participating Subsidiary may take such steps as it may deem
necessary or appropriate for the withholding of any taxes (including the
withholding of shares of Common Stock otherwise issuable which appropriate Fair
Market Value) which the Company or the Participating Subsidiary is required by
any law or regulation or any governmental authority, whether federal, state or
local, domestic or foreign, to withhold in connection with any Stock Option,
Stock Appreciation Right or Supplemental Bonus, including, but not limited to,
the withholding of all or any portion of any payment or the withholding of
issuance of shares of Common Stock to be issued upon the exercise of any Stock
Option or Stock Appreciation Right or upon payment of any Supplemental Bonus,
until the Participant reimburses the Company or Participating Subsidiary for the
amount the Company or Participating Subsidiary is required to withhold with
respect to such taxes, or canceling any portion of
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such payment or issuance in an amount sufficient to reimburse itself for the
amount it is required to so withhold.
XVI. BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with one or
more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Stock Options, Stock
Appreciation Rights or Supplemental Bonuses, including, without limitation,
arrangements for the simultaneous exercise of Stock Option, Stock Appreciation
Rights or Supplemental Bonuses, and sale of the shares acquired upon such
exercise.
XVII. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of this
Plan to shareholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Participating Subsidiary now has lawfully put into
effect, including, without limitation, any retirement, pension, savings and
stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
XVIII. EFFECTIVE DATE
This Plan was adopted by the Board of Directors and became effective on
June 25, 1992 and was approved by the Company's shareholders on May 14, 1993.
No Stock Options shall be granted subsequent to ten years after the effective
date of the Plan. Stock Options outstanding subsequent to ten years after the
effective date of the Plan shall continue to be governed by the provisions of
the Plan.
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COLORADO MEDTECH, INC. EXHIBIT B
1996 EMPLOYEE STOCK PURCHASE PLAN
1) PURPOSE
This Employee Qualified Stock Purchase Plan (the "Plan") is intended to
serve as an incentive and to encourage stock ownership by all eligible employees
of Colorado MEDtech, Inc. (the "Company") and participating subsidiaries (as
defined in Section 17 hereof) so that they may share in the fortunes of the
Company by acquiring or increasing their proprietary interest in the Company.
The Plan is designed to encourage eligible employees to remain in the employ of
the Company. It is intended that options issued pursuant to the Plan shall
constitute options issued pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code").
2) ELIGIBLE EMPLOYEES
All employees of the Company or any of its participating subsidiaries who
have completed six (6) months of employment prior to the beginning of any
Payment Period (as hereinafter defined) with the Company or any of its
participating subsidiaries ("Eligible Employees") shall be eligible to receive
options under the Plan to Purchase the Company's Common Stock, no par value (the
"Stock"). In no event may an employee be granted an option if such employee,
immediately after the option is granted, owns stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of stock of
the Company or of its parent corporation or subsidiary corporation, as the terms
"parent corporation" and "subsidiary corporation" are defined in Section 424 (d)
of the Code shall apply and all stock which the employee may purchase under
outstanding options (notwithstanding that such options may not be presently
exercisable) shall be treated as stock owned by the employee.
For purposes of this Article 2, the term "employee" shall not include an
employee whose customary employment by the Company or participating subsidiary
is twenty (20) hours or less per week or is for not more than five (5) months in
any calendar year.
3) STOCK SUBJECT TO THE PLAN
The stock subject to the options issued under the Plan shall be shares of
the Company's authorized but unissued shares of Stock or shares of Stock
reacquired by the Company. The aggregate number of shares which may be issued
pursuant to the Plan is 240,000 subject to increase or decrease as provided
herein by reason of stock split-ups, reclassifications, stock dividends, changes
in par value and the like. The maximum number of shares available during each
annual Payment Period shall not exceed 80,000 shares.
4) PAYMENT PERIODS AND STOCK OPTIONS
The annual period, January 1 to December 31 is a payment period during
which payroll deductions will be accumulated under the Plan ("Payment Periods").
The Plan will be implemented in three (3) annual Payment Periods beginning
January 1, 1997. Each Payment Period includes only regular pay days falling
within it.
One time each year, on the first business day of each Payment Period, the
Company will grant to each eligible Employee who has elected to participate in
the Plan (a "Participant") an option to
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purchase on the last day of such Payment Period, at the Option Price hereinafter
provided, such number of full shares of the Stock reserved for the purposes of
the Plan as his/her accumulated payroll deductions on the last day of such
Payment Period will pay for at such Option Price, provided that such employee
remains eligible to participate in the Plan throughout such Payment Period. If
the Payment Period terminates on a Saturday, Sunday or legal holiday, then the
last day of the Payment Period shall be the last business day prior to December
31. The Option Price for each Payment Period shall be the lesser of (i) 85% of
the fair market value (as hereinafter defined) of the Stock on the first
business day of the Payment Period; or (ii) 85% of the fair market value of the
Stock on the last day of the Payment Period, in either case rounded up to avoid
fractions other than 1/8, 1/4, 1/2 and 3/4. In the event of an increase or
decrease in the number of outstanding shares of Stock through stock split-ups,
reclassifications, stock dividends, changes in par value and the like, an
appropriate adjustment shall be made in the number of shares and Option Price
per share provided for under the Plan, either by a proportionate increase in the
number of shares and a proportionate decrease in the Option Price per share, or
by a proportionate decrease in the number of shares and proportionate increase
in the Option Price per share, as may be required to enable an Eligible Employee
who is then a Participant in the Plan as to whom an option is exercised on the
last day of any then current Payment Period to acquire such number of full
shares as his/her accumulated payroll deduction on such date will pay for at the
adjusted Option Price. The determination of what constitutes an "appropriate
adjustment" shall be made by the Board of Directors, whose determination thereof
shall be final.
For purposes of this Plan the term "fair market value" means, if the Stock
is listed on a national securities exchange, the average of the high and low
prices of the Stock on such exchange or if the Stock is traded in the over-the-
counter securities market, the mean between the closing bid and asked prices of
the Stock.
No employee shall be granted an option which permits his/her rights to
purchase Stock under the Plan and any other employee stock purchase plans of the
Company or any parent or subsidiary corporations to accrue at a rate which
exceeds $25,000 in fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such option is outstanding at
any time. A right to purchase Stock under the Plan "accrues" on the last day of
the Payment Period. The purpose of the limitation in the preceding sentence is
to comply with Section 423(b)(8) of the Code.
5) EXERCISE OF OPTION
Each Participant who fails to withdraw from participation in the Plan on or
prior to the last business day of a Payment Period shall be deemed to have
exercised his/her option on such date and shall be deemed to have purchased from
the Company such number of full shares of Stock reserved for the purpose of the
Plan as his/her accumulated payroll deductions on such date will pay for at such
Option Price. If a Participant is not an employee on the last day of a Payment
Period, he/she shall not be entitled to exercise his/her option.
6) UNUSED PAYROLL DEDUCTIONS
Only full shares of Stock may be purchased. Any balance remaining in a
Participant's account after a purchase will be reported to the employee and will
be carried in the employee's account towards the purchase of additional shares
in the next Payment Period.
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7) AUTHORIZATION FOR ENTERING PLAN
An Eligible Employee may elect to participate in the Plan by completing,
signing and delivering to the Company's Human Resources Manager an
authorization:
(a) stating the amount to be deducted regularly from his/her pay;
(b) authorizing the purchase of Stock for him/her in each Payment Period
in accordance with the terms of the Plan; and
(c) specifying the exact name in which stock purchased for him/her is to
be issued as provided under Article 11 hereof.
Such Authorization must be received by the Human Resources Manger at least
ten (10) days before the beginning date of a Payment Period to be effective for
that Payment Period.
Unless a Participant files a new Authorization or withdraws from the Plan,
his/her deductions and purchases under the Authorization he/she has on file
under the Plan will continue as long as the Plan remains in effect.
The Company will accumulate and hold for the Participant's account the
amounts deducted from his/her pay. Interest earned, if any, will be credited to
the Participant's account for the purchase of additional shares.
8) MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS
An employee may authorize payroll deductions or make lump sum contributions
in any even dollar amount up to, but not more than, ten percent (10%) of his/her
regular base pay; provided, however, that the minimum deduction in respect of
any payroll period shall be Five Dollars ($5.00) (or such lesser amount as the
Board shall establish).
9) CHANGE IN PAYROLL DEDUCTIONS; LUMP SUM CONTRIBUTION
Deductions may be increased or decreased only once in a Payment Period. In
addition, an employee may make one lump sum contribution to the Plan at any time
in each Payment Period, which contribution shall be treated as, and deemed to
be, solely for purposes of the Plan, a payroll deduction. A new Authorization
will be required and must be received by the Human Resources Manager at least
ten (10) days before the end of the payroll period for which it is to become
effective.
10) WITHDRAWAL FROM THE PLAN
A participant may withdraw from the Plan in whole but not in part, at any
time prior to the fifteenth (15th) calendar date prior to the end of each
Payment Period or, if such day is not a business day, then the next succeeding
business day, by delivering a Withdrawal Notice to the Human Resources Manager,
in which event the Company will promptly refund the entire balance of his
deductions not theretofore used to purchase Stock under the Plan.
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A Participant who has withdrawn from the Plan shall be treated as an
employee who has never elected to participate in the Plan. To re-enter the Plan
a new Authorization must be filed at least ten (10) days before the beginning
date of a Payment Period, which Authorization will not become effective before
the beginning of the next Payment Period.
11) ISSUANCE OF STOCK
Certificates for Stock issued to Participants will be delivered as soon as
practicable after each Payment Period.
Stock purchased under the Plan will be issued only in the name of the
Participant, or if his/her Authorization so specified, in the name of the
Participant and another person of legal age as joint tenants with rights of
survivorship.
12) NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS
An employee's rights under the Plan may not be transferred to, assigned to,
or availed of by, any other person. Any option granted to an employee under
this Plan may be exercised only by him/her during his lifetime.
13) TERMINATION OF EMPLOYEE'S RIGHTS
An employee's rights to participate in, and a participant's rights under,
the plan will terminate when he/she ceases to be an employee because of
retirement, resignation, layoff, discharge, death, change of status, or for any
other reason. A Withdrawal Notice will be considered as having been received
from a Participant on the day his/her employment ceases, and all payroll
deductions not used to purchase Stock will be refunded to him/her.
If a Participant's payroll deductions are interrupted by any legal process,
a Withdrawal Notice will be considered as having been received from him/her on
the day the interruption occurs.
14) TERMINATION AND AMENDMENTS TO PLAN
The Plan may be terminated at any time by the Company's Board of Directors.
It will terminate in any case when all or substantially all the unissued shares
of Stock reserved for the purposes of the Plan have been purchased. If at any
time shares of Stock reserved for the purposes of the Plan remain available for
purchase but not in sufficient number to satisfy all then unfilled purchase
requirements, the available shares shall be apportioned among participants in
proportion to their options and the Plan shall terminate. Upon such termination
or any other termination of the Plan, all payroll deductions not used to
purchase Stock will be refunded.
The Board of Directors also reserves the right to amend the Plan from time
to time, in any respect; provided, however, that no amendment shall be effective
without prior approval of the shareholders entitled to vote thereon, which would
(a) except as provided in Articles 3 and 4, increase the number of shares of
Stock to be offered under the Plan or (b) change the class of employees eligible
to participate in the Plan. Further, no amendment shall be made without prior
approval of the shareholders of the Company if such amendment would cause the
Plan to no longer comply with Rule 16b-3 under the Securities Exchange Act of
1934 or with Section 423 of the Internal Revenue Code.
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15) LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN
Each Participant who is subject to Rule 16(a) promulgated under the
Securities Exchange Act of 1934, will agree upon entering the Plan to hold the
Stock for a period of six (6) months after its acquisition. Because of certain
federal tax law requirements, each Participant will agree upon entering the
Plan, promptly to give the Company notice of any Stock disposed of within two
(2) years after the date of the first day of the Payment Period during which the
Stock was purchased under the Plan showing the number of such shares disposed
of. The employee assumes the risk of any fluctuations in the price of such
Stock.
16) COMPANY'S PAYMENT OF EXPENSES RELATED TO PLAN
The Company will bear all costs of administering and carrying out the Plan.
17) PARTICIPATING SUBSIDIARIES
The term "participating subsidiaries" shall mean any subsidiary of the
Company which is designated by the Board of Directors to participate in the
Plan. The Board of Directors shall have the power to make such designation
before or after the plan is approved by the stockholders.
18) ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company or
by a committee composed solely of two or more directors (the "Committee") each
of whom is a Non-Employee Director. A "Non-Employee Director" is a person who
satisfies the definition of a "non-employee director" set forth in Rule 16b-3,
as in effect from time to time, under the Securities Exchange Act of 1934, as
amended. The Board of Directors may from time to time, remove members from, or
add members to, the Committee. Vacancies on the Committee, however caused,
shall be filled by the Board of Directors. The Committee shall select one of
its members as Chairman, and shall hold meetings at such times and places as it
may determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.
The interpretation and construction of any provision of the Plan and
adoption of rules and regulations for administering the Plan will be made by the
Committee, subject, however, at all times to the final jurisdiction which shall
rest in the Board. Determinations made by the Committee and approved by the
Board with respect to any matter or provision contained in the Plan will be
final, conclusive and binding upon the Company and upon all Participants, their
heirs or legal representatives. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it. No member of the
Committee shall be eligible to participate in the Plan while serving as a member
of the Committee.
19) OPTIONEES NOT STOCKHOLDERS
Neither the granting of an option to an employee nor the deductions from
his/her pay shall constitute such employee a stockholder of the shares covered
by an option until such shares have been purchased by a certificate representing
such shares has been issued to him/her.
5
<PAGE>
20) GOVERNMENTAL REGULATION
The Company's obligation to sell and deliver shares of the Stock under this
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such stock.
21) EFFECTIVENESS OF THE PLAN
The Plan shall become effective September 27, 1996, the date of its
adoption by the Board of Directors, subject to the approval of the holders of a
majority of the securities of the Company entitled to vote, which approval must
occur within the period beginning twelve (12) months before the ending twelve
(12) months after the date the Plan is adopted by the Board of Directors.
Anything to the contrary notwithstanding, no Stock may be issued under the Plan
until such shareholder approval is obtained.
6
<PAGE>
COLORADO MEDTECH, INC. PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 22, 1996
The undersigned hereby constitutes, appoints, and authorizes John V.
Atanasoff II and Bruce L. Arfmann, and each of them, as the true and lawful
attorney and Proxy of the undersigned, with full power of substitution and
appointment, for and in the name, place and stead of the undersigned to act for
and vote as designated below, all of the undersigned's shares of the no par
value Common Stock of Colorado MEDtech, Inc., a Colorado corporation, at the
Annual Meeting of the Shareholders to be held November 22, 1996, at Hotel
Boulderado, 2115 13th Street, Boulder, Colorado, at 3:00 p.m., and at any and
all adjournments thereof, with respect to the matters set forth below and
described in the Notice of Annual Meeting dated October 15, 1996, receipt of
which is hereby acknowledged.
1. Approval of the election of each of the seven nominees named herein for the
office of director to serve until the next Annual Meeting of Shareholders or
until their respective successors are elected and qualified.
For all nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY to vote for all listed below / /
BELOW) / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
J. Atanasoff II, M. Barr, I. Langenthal, D. Leffingwell, C. Mezey, R. Sullivan,
and J. Wolfe
2. Approval of the amendment of the Colorado MEDtech, Inc. Stock Option Plan to
increase the number of shares reserved to 2,000,000 from 1,400,000 shares of
the Company's Common Stock for issuance thereunder.
/ / FOR / / AGAINST
3. Approval of the Colorado MEDtech, Inc. 1996 Employee Stock Purchase Plan and
to reserve 240,000 shares of the Company's Common Stock for issuance
thereunder.
/ / FOR / / AGAINST
4. The Proxy is authorized to vote upon any other business as may properly come
before the Annual Meeting or any adjournments thereof.
________________________________________________________________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COLORADO MEDTECH,
INC.
PLEASE SIGN AND RETURN THIS PROXY USING THE ENCLOSED PRE-PAID ENVELOPE.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING.
<PAGE>
The undersigned hereby revokes any Proxies as to said shares heretofore
given by the undersigned, and ratifies and confirms all that said attorney and
Proxy may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
<TABLE>
<S> <C>
DATED: -------------------------- , 1996 -----------------------------------------
Signature(s) of Shareholder(s)
-----------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the
name(s) shown hereon. Executors,
administrators, trustees, guardians and
attorneys should indicate their capacity
when signing. Attorneys should submit
powers of attorney. When shares are held
by joint tenants, both should sign. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
</TABLE>
