<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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
Ciprico Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CIPRICO INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------
The Annual Meeting of Shareholders of Ciprico Inc. will be held on
Thursday, January 28, 1999, at 3:30 p.m. (Minneapolis time), at the Radisson
Plaza Hotel, 35 South Seventh Street, Minneapolis, Minnesota, for the
following purposes:
1. To set the number of directors at six (6).
2. To elect two Class II directors for the ensuing year.
3. To approve the 1999 Amended and Restated Stock Option Plan as a
consolidation of the Company's 1992 Nonqualified Stock Option
Plan and 1994 Incentive Stock Option Plan without the reservation
of additional shares.
4. To consider and act upon such other matters as may properly come
before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on December 11,
1998, are entitled to notice of and to vote at the meeting or any adjournment
thereof.
Your vote is important. We ask that you complete, sign, date and return
the enclosed proxy in the envelope provided for your convenience. The prompt
return of proxies will save the Company the expense of further requests for
proxies.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT H. KILL
CHAIRMAN AND PRESIDENT
Plymouth, Minnesota
December 21, 1998
<PAGE>
CIPRICO INC.
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 28, 1999
--------------------
PROXY STATEMENT
--------------------
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Ciprico Inc. ("the
Company") for use at the Annual Meeting of Shareholders to be held on January
28, 1999, at the location and for the purposes set forth in the notice of
meeting, and at any adjournment thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may,
without compensation other than their regular remuneration, solicit proxies
personally or by telephone.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the meeting by giving written notice of such revocation to the
Secretary of the Company. Proxies not revoked will be voted in accordance
with the choice specified by shareholders by means of the ballot provided on
the Proxy for that purpose. Proxies which are signed but which lack any such
specification will, subject to the following, be voted in favor of the
proposals set forth in the Notice of Meeting and in favor of the number and
slate of directors proposed by the Board of Directors and listed herein. If
a shareholder abstains from voting as to any matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such matter, but shall not be deemed to have been voted in favor of such
matter. Abstentions, therefore, as to any proposal will have the same effect
as votes against such proposal. If a broker returns a "non-vote" proxy,
indicating a lack of voting instructions by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to
vote on a particular matter, then the shares covered by such non-vote shall
be deemed present at the meeting for purposes of determining a quorum but
shall not be deemed to be represented at the meeting for purposes of
calculating the vote required for approval of such matter.
The mailing address of the principal executive office of the Company is
2800 Campus Drive, Plymouth, Minnesota 55441. The Company expects that this
Proxy Statement, the related proxy and notice of meeting will first be mailed
to shareholders on or about December 21, 1998.
-1-
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed December 11, 1998, as
the record date for determining shareholders entitled to vote at the Annual
Meeting. Persons who were not shareholders on such date will not be allowed
to vote at the Annual Meeting. At the close of business on December 11,
1998, 4,874,191 shares of the Company's Common Stock were issued and
outstanding. The Common Stock is the only outstanding class of capital stock
of the Company entitled to vote at the meeting. Each share of Common Stock
is entitled to one vote on each matter to be voted upon at the meeting.
Holders of Common Stock are not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS
The following table provides information concerning persons known to the
Company to be the beneficial owners of more than 5% of the Company's
outstanding Common Stock as of December 11, 1998. Unless otherwise
indicated, the shareholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
-------------------- ------------------- ----------------
<S> <C> <C>
Perkins Capital Management, Inc. 823,400(1) 16.9%
730 E. Lake Street
Wayzata, MN 55391
Heartland Advisors, Inc. 492,600(2) 10.1%
790 North Milwaukee Street
Milwaukee, WI 53202
</TABLE>
- --------------------
(1) Perkins Capital Management, Inc. has indicated that as of December 7, 1998,
it beneficially owns 823,400 shares, that it has no voting power as to
597,075 of such shares and that it has sole dispositive power over all of
such shares.
(2) Heartland Advisors, Inc. has indicated that as of August 31, 1998, it
beneficially owns 492,600 shares, that it has no voting power as to 490,000
of such shares and sole dispositive power as to all of such shares.
-2-
<PAGE>
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of December 11, 1998 by each executive officer of the
Company named in the Summary Compensation table, by each current director and
nominee for director of the Company and by all directors and executive
officers (including the named individuals) as a group. Unless otherwise
indicated, the shareholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME OF DIRECTOR/NOMINEE NUMBER OF SHARES
OR IDENTITY OF GROUP BENEFICIALLY OWNED PERCENT OF CLASS (1)
<S> <C> <C>
Robert H. Kill 105,528(2) 2.1%
Donald H. Soukup 65,250(3)(4) 1.3%
Ronald B. Thomas 56,270(3)(4) 1.1%
William N. Wray 33,000(3)(5) *
Gary L. Deaner 27,000(3)(6) *
Peyton Gannaway 18,000(5) *
Bruce J. Bergman 0(3) *
All officers and
directors as a 338,633(7) 6.6%
group (9 persons)
</TABLE>
- --------------------
* Less than 1%
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of December 11, 1998, or within
sixty days of such date, are treated as outstanding only when
determining the percent owned by such individual and when determining
the percent owned by a group.
(2) Amount includes 20,000 shares held by Mr. Kill's wife and 52,500
shares purchasable upon exercise of options presently exercisable or
exercisable within sixty days of December 11, 1998.
(3) Does not include an option for 6,000 shares which will be granted to
such individual as of the date of the Annual Meeting and which will
become exercisable as of the date of the Company's 2000 Annual Meeting
pursuant to an automatic grant under the Company's 1999 Amended and
Restated Stock Option Plan, if such Plan is approved by the
shareholders, or under the 1992 Nonqualified Stock Option Plan if the
1999 Plan is not so approved.
(4) Amount includes 36,000 shares purchasable upon exercise of options
presently exercisable or exercisable within sixty days of December 11,
1998.
-3-
<PAGE>
(5) Such shares are not outstanding but are purchasable upon exercise of
options presently exercisable or exercisable within sixty days of
December 11, 1998.
(6) Amount includes 22,500 shares purchasable upon exercise of options
presently exercisable or exercisable within sixty days of December 11,
1998.
(7) Amount includes 229,120 shares purchasable upon exercise of options
presently exercisable or exercisable within sixty days of December 11,
1998.
ELECTION OF DIRECTORS
(PROPOSALS #1 AND #2)
GENERAL INFORMATION
The Certificate of Incorporation and Bylaws of the Company provide that
the Board of Directors shall consist of not less than three directors and not
more than six directors, that the number of directors to be elected shall be
determined by the shareholders at each annual meeting, and that the number of
directors may be increased by the Board between annual meetings. The
Certificate of Incorporation also provides for the election of three classes
of directors with terms staggered so as to require the election of only one
class of directors each year. Only directors who are members of Class II
will be elected at the Annual Meeting. Directors who are members of Classes
I and III will continue to serve for the terms for which they were previously
elected. The Board recommends that the number of directors be set at six and
that two Class II directors be elected at the Annual Meeting. The
affirmative vote of the holders of a majority of the shares represented and
voting at the Annual Meeting is required to set the number of directors at
six. Mr. Peyton Gannaway, currently a Class II director, has indicated that
he does not wish to stand for re-election. Accordingly, the Board of
Directors nominates Bruce J. Bergman for election and Ronald B. Thomas for
re-election as Class II directors. If elected, Messrs. Bergman and Thomas
will each serve for a three year term as a Class II director and until his
successor has been duly elected and qualified.
Unless authority is withheld, the proxies solicited hereby will be voted
for the election of Bruce J. Bergman and Ronald B. Thomas as a director for a
term of three years. If, prior to the meeting, it should become known that
either Class II nominee will be unable to serve as a director after the
meeting by reason of death, incapacity or other unexpected occurrence, the
proxies will be voted for such substitute nominee as is selected by the Board
of Directors or, alternatively, not voted for any nominee. The Board of
Directors has no reason to believe that either nominee will be unable to
serve. The election of directors is decided by a plurality of the votes
cast. Following is information about the nominee and all other directors of
the Company whose terms continue beyond the Annual Meeting.
Ronald B. Thomas (Class II, term ending at 1999 Annual Meeting), age 55,
has been a director of the Company since the Company's incorporation in
February 1978 and was Chairman of the Board from March 1988 to January 1996.
Mr. Thomas has been President and Chief Executive
-4-
<PAGE>
Officer of Astrocom Corp., a manufacturer of electronic data communications
products, since June 30, 1997. He was a private investor from March 1988 to
June 1997. Mr. Thomas served as President and Treasurer of the Company from
February 1978 to March 1988 and was the sole proprietor of the Company's
unincorporated predecessor. Mr. Thomas is a director of Astrocom Corp.
Bruce J. Bergman (nominee for Class II), age 57, has been a principal
with Bergman & Associates, a high tech consulting practice, since August
1998. Prior to founding Bergman & Associates, Mr. Bergman was President and
CEO (from 1996 to 1998) of Brocade Communications Systems, Inc., a provider
of gigabit switching hardware and software products, President and CEO (from
1995 to 1996) of ATG Cygnet, Inc., a supplier of multiple-media, robotic mass
storage libraries, President and CEO (from 1993 to 1994) of Proteon, Inc., a
supplier of internetworking hardware and software products, and President and
CEO (from 1983 to 1993) of Xylogics, Inc. a provider of computer network
access, remote access, networking and input/output hardware and software
products.
Robert H. Kill (Class III, term ending at 2000 Annual Meeting), age 51,
has been Chairman of the Board of the Company since January 1996, President
since March 1988 and a director since September 1987. Mr. Kill was Executive
Vice President of the Company from September 1987 to March 1988, Secretary
from September 1987 to July 1988 and from November 1989 to October 1993, and
Vice President and General Manager from August 1986 to September 1987. Mr.
Kill held several marketing and sales positions at Northern Telecom, Inc.
from 1979 to 1986, his latest position being Vice President, Terminals
Distribution.
Gary L. Deaner (Class III, term ending at 2000 Annual Meeting), age 58,
was elected a director of the Company in May 1995. Mr. Deaner has been a
Vice President of Raintree Associates, a marketing and planning company,
since June 1998. Mr. Deaner served as Vice President of Marketing and
Strategic Development for J. River, Inc., a software products company, from
September 1996 to June 1998, and as Vice President and General Manager, Lan
Connect, of Digi International, Inc., a manufacturer of computer
communications products, from January 1995 to September 1996. From August
1991 to January 1995 Mr. Deaner served as President of Arnet Corporation, a
subsidiary of Digi International, and from 1985 to 1991 he was Vice President
of Marketing for Digi International.
Donald H. Soukup (Class I, term ending at 2001 Annual Meeting), age 58,
became a director of the Company in March 1982. Mr. Soukup has been a
private investor for more than five years. Mr. Soukup is also a director of
Minntech Corp. and several privately held companies.
William N. Wray (Class I, term ending at 2001 Annual Meeting), age 70,
has been a director of the Company since July 1993. Prior to his retirement
in 1988, Mr. Wray held various management positions at Honeywell, Inc., the
most recent being Executive Vice President of Honeywell Information Systems
(from 1985 to 1989) and Executive Vice President of Corporate Marketing (from
1987 to 1988).
-5-
<PAGE>
There are no arrangements or understandings between any of the directors
or any other person (other than arrangements or understandings with directors
acting as such) pursuant to which any person was selected as a director or
nominee of the Company. There are no family relationships among the
Company's directors.
COMMITTEE AND BOARD MEETINGS
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee members during
fiscal 1998 were Donald H. Soukup, Robert H. Kill and Peyton Gannaway. This
committee is responsible for reviewing the Company's internal audit
procedures and quarterly and annual financial statements, reviewing with the
Company's independent accountants the results of the annual audit, and
implementing and monitoring the Company's cash investment policy. The Audit
Committee met once during fiscal 1998. The Compensation Committee members
are Gary L. Deaner, William N. Wray and Ronald B. Thomas. The Compensation
Committee recommends to the Board of Directors from time to time the salaries
and other compensation to be paid to executive officers of the Company and
administers the Company's stock option and restricted stock plans. The
Compensation Committee met three times during fiscal 1998. Members of both
of such Committees meet informally from time to time throughout the year on
Committee matters.
During fiscal 1998, the Board of Directors held five meetings. Each
incumbent director attended 75% or more of the total number of meetings (held
during the period(s) for which he has been a director or served on
committee(s)) of the Board and of committee(s) of which he was a member.
DIRECTORS FEES
Directors who are not employees of the Company receive $500 for each
Board meeting attended. In addition, under the terms of the Company's 1992
Nonqualified Stock Option Plan as currently in effect, and under the terms of
the 1999 Amended and Restated Stock Option Plan, if approved by the
shareholders, each nonemployee director who is elected or re-elected to the
Board, or whose term of office continues after an annual meeting of
shareholders, will receive a seven-year option for 6,000 shares at an
exercise price equal to the closing price of the Company's Common Stock on
the date of grant, exercisable one year from the date of grant if the
director has continued to serve on the Board throughout such period. On
January 29, 1998, Messrs. Deaner, Gannaway, Soukup, Thomas and Wray each
received an option to purchase 6,000 shares at $12.40 per share. Such
options will become exercisable on January 28, 1999.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The
Compensation Committee of the Board of Directors of the Company is composed
of directors William N. Wray,
-6-
<PAGE>
Gary L. Deaner and Ronald B. Thomas. None of the members of the Committee
currently is an employee or officer of the Company and none is affiliated
with any entity other than the Company with which an executive officer of the
Company is affiliated. Mr. Thomas served as President and Treasurer of the
Company from February 1978 to March 1988 and was the sole proprietor of the
Company's unincorporated predecessor.
OVERVIEW AND PHILOSOPHY. The Company's executive compensation program
is comprised of base salaries, annual and quarterly performance bonuses,
long-term incentive compensation in the form of stock options and restricted
stock grants and various benefits, including the Company's savings plan in
which all qualified employees of the Company participate. In addition, the
Compensation Committee from time to time may award special cash bonuses,
stock options and restricted stock grants in connection with new hiring,
promotions or non-recurring, extraordinary performance.
The Compensation Committee has followed a policy of paying annual base
salaries which are on the moderate side of being competitive in its industry
and of awarding cash bonuses based on achievement of operating profit goals
and secondarily on achievement of revenue goals. If minimum operating profit
goals are achieved, the officer receives a cash bonus in an amount equal to
the percentage of goal achieved multiplied by the established maximum bonus
which is a percentage of annual base salary. The goals are established
annually by the Compensation Committee or President of the Company. The
Company does not have formal employment agreements with any of its officers.
The Company elected a new employee as Chief Financial Officer in
September 1998 and promoted an existing employee to Vice President Product
Development and Operations in September 1998. These officers together with
the Company's Chief Executive Officer are the only executive officers of the
Company. In connection with her recruitment and election, the new Chief
Financial Officer was granted stock options and restricted stock which vest
over periods of years and provide incentive for long term achievement and
employment. The Company's new Vice President was already a participant in
the Company's stock option and restricted stock option plans. Both officers
will participate in the management cash bonus plan described above. No cash
bonuses were earned by any employee while serving as an executive officer in
fiscal 1998.
GENERAL. The Company provides medical and insurance benefits to its
executive officers which are generally available to all Company employees.
The Company has a savings plan in which all qualified employees, including
the executive officers, may participate. Each year the Company contributes
to the savings plan an amount equal to two percent of gross wages for each
employee who contributes four percent and the Company may contribute an
additional two percent of gross wages based on the operating profit of the
Company for the fiscal year and plan contributions by the individual
employee. The amount of perquisites allowed to executive officers, as
determined in accordance with rules of the Securities and Exchange
Commission, did not exceed 10% of salary in fiscal 1998.
CHIEF EXECUTIVE OFFICER COMPENSATION. Robert H. Kill served as the
Company's Chief Executive Officer in fiscal 1998. His annual base salary and
eligibility for a cash bonus was
-7-
<PAGE>
determined in accordance with the policies described above as applicable to
all executive officers. His base salary was increased from $165,000 in
fiscal 1997 to $175,000 in fiscal 1998. No cash bonus was earned in fiscal
1998.
In 1998 in order to continue providing incentive for participation in
long term appreciation in shareholder value, the Committee made a restricted
stock grant to Mr. Kill of 5,000 shares, 2,500 of which will vest in 2000 and
2,500 in 2002, and issued to Mr. Kill an option to purchase 15,000 shares at
the market price on the date of grant, 25 percent of which will vest in each
of the first four anniversaries of the date of grant. Grants of restricted
stock and stock options are based on qualitative rather than quantitative
factors and reflect the desire of the Board of Directors and Compensation
Committee to retain key executives, encourage excellent performance and
increase Company stock ownership by key executives in order to align their
interests with those of shareholders generally.
SUMMARY. The Company was in a transition phase in fiscal 1998 as it
suffered disappointments in revenues and operating results. A new Chief
Financial Officer and Vice President were elected. The Compensation
Committee annually reviews its compensation policies but anticipates
generally continuing its policy of paying relatively moderate base salaries,
basing bonuses on specific revenue and operating profit goals and granting
stock options and restricted stock to provide long-term incentives.
MEMBERS OF THE COMPENSATION COMMITTEE:
William N. Wray
Gary L. Deaner
Ronald B. Thomas
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid
during each of the Company's last three fiscal years to the Company's Chief
Executive Officer, the only executive officer whose total salary and bonus
for fiscal 1998 exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- ------------------------------------------------------
Awards Payouts
------ -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)(2)
- ------------------ ---- ------ ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Kill, 1998 171,667 -0- -0- 69,375(3) 15,000 -0- 5,045
President and 1997 161,333 80,558 -0- 73,750(3) 15,000 -0- 7,397
CEO 1996 149,333 118,500 -0- -0- 15,000 -0- 5,110
</TABLE>
- --------------------
(1) Does not include automobile allowance, the amount of which was less than
10% of the individual's listed compensation.
-8-
<PAGE>
(2) Amount reflects Company contributions to the Company's Savings Plan, a
401(k) plan.
(3) Dividends, if declared by the Company will be paid on the shares. On
September 30, 1998, Mr. Kill held 10,000 restricted shares having a then
current market value of $73,125.
OPTION/SAR GRANTS DURING 1998 FISCAL YEAR
The following table sets forth information regarding stock options
granted to the named executive officer during the fiscal year ended September
30, 1998. The Company has not granted stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
% OF TOTAL OPTION TERM
NUMBER OF SECURITIES OPTIONS/SARS GRANTED -----------------------
UNDERLYING OPTIONS/SARS TO EMPLOYEES IN FISCAL EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) YEAR PRICE DATE
($/SH) 5% ($) 10% ($)
---- ----------------------- ---------------------- ---------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Kill 15,000 (1) 6.7 13.813 01/29/03 57,244 126,495
</TABLE>
- --------------------
(1) Such option is exercisable as to 3,750 shares per year commencing
January 29, 1999.
AGGREGATED OPTION/SAR EXERCISES DURING 1998 FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information related to options exercised by
the named executive officer during fiscal 1998 and the number and value of
options held at fiscal year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
---- --------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C>
Robert H. Kill 20,000 233,340 37,500/37,500 85,304/12,722
</TABLE>
- --------------------
(1) These amounts represent the difference between the exercise price of the
in-the-money options and the market price of the Company's Common Stock on
September 30, 1998. The closing price of the Company's Common Stock on
that day on the Nasdaq Stock Market was $7.3125. Options are in-the-money
if the market value of the shares covered thereby is greater than the
option exercise price.
-9-
<PAGE>
STOCK PERFORMANCE CHART
The following chart compares the cumulative total shareholder return on
the Company's Common Stock with the S&P SmallCap 600 Index and the Computers
(Peripherals) Small Index. The comparison assumes $100 was invested on
September 30, 1993 in the Company's Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
Company/Index 9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ciprico $100.00 $ 87.80 $214.60 $585.31 $442.64 $213.99
S&P SmallCap 600 100.00 99.42 125.45 144.66 198.14 161.14
Computers
(Peripherals) Small 100.00 160.68 302.57 173.27 179.62 80.06
</TABLE>
-10-
<PAGE>
APPROVAL OF 1999 AMENDED AND RESTATED STOCK OPTION PLAN
AS A CONSOLIDATION OF THE 1992 NONQUALIFIED STOCK OPTION PLAN
AND THE 1994 INCENTIVE STOCK OPTION PLAN
(PROPOSAL #3)
GENERAL. The Company currently has in effect a 1992 Nonqualified Stock
Option Plan (the "1992 Plan") and a 1994 Incentive Stock Option Plan (the
"1994" Plan). In order to simplify administration of the Plans, the Board of
Directors recommends that shareholders approve the consolidation of the 1992
Plan and the 1994 Plan into one plan, to be known as the Ciprico Inc. 1999
Amended and Restated Stock Option Plan (the "1999 Plan"). The provisions of
the 1992 Plan and the 1994 Plan will continue to exist for purposes of
determining rights and obligations of the Company and optionees with respect
to options previously granted under such Plans. No additional shares will be
reserved for the 1999 Plan. Shares issuable under the 1999 Plan will be the
1,428,582 shares currently reserved and remaining unissued under the 1992
Plan and the 1994 Plan.
A more detailed description of the 1999 Plan is set forth below, but
such description is qualified in its entirety by reference to the full text
of the 1999 Plan, a copy of which may be obtained without charge upon written
request to the Company's Vice President of Finance.
PURPOSE. The purpose of the 1999 Plan is to promote the success of the
Company by facilitating the employment and retention of competent personnel
and by furnishing incentive to directors, officers and employees upon whose
efforts the success of the Company will depend to a large degree.
TERM. Incentive stock options may be granted pursuant to the 1999 Plan
until October 22, 2008, ten years from the date the 1999 Plan was adopted by
the Board. Non-qualified options may be granted under the 1999 Plan until
the Plan is discontinued or terminated by the Board.
ADMINISTRATION. The 1999 Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"). The 1999 Plan gives
broad powers to the Committee to administer and interpret the Plan, including
the authority to select the individuals to be granted options and to
prescribe the particular form and conditions of each option granted.
ELIGIBILITY. All officers and employees of the Company or any
subsidiary are eligible to receive incentive stock options pursuant to the
1999 Plan. All directors, officers and employees of, and consultants and
advisors to, the Company or of any subsidiary are eligible to receive
nonqualified stock options pursuant to the 1999 Plan. As of November 30,
1998, the Company had approximately 119 employees and directors.
DIRECTORS' FORMULA GRANT. The 1999 Plan provides that each nonemployee
director who is elected or reelected as a director of the Company or whose
term of office continues after an annual meeting at which directors are
elected will automatically be granted an option to purchase 6,000 shares at
an exercise price equal to the closing price of the Company's Common Stock on
the date
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<PAGE>
on which the option is granted. Each such option will be for a term of seven
years and will become exercisable one year from the date of grant if the
director has continued to serve on the Board throughout such period. At the
1999 Annual Meeting, Messrs. Soukup, Thomas, Deaner and Wray will each
receive an option to purchase 6,000 shares pursuant to such provision.
OPTIONS. When an option is granted under the Plan, the Committee at its
discretion specifies the option price, the type of option (either "incentive"
or "nonqualified") to be granted and the number of shares of Common Stock
which may be purchased upon exercise of the option. The exercise price of an
incentive stock option may not be less than 100% of the fair market value of
the Company's Common Stock on the date of grant and, unless otherwise
determined by the Committee, the option price of a nonqualified option may
not be less than 100% of the fair market value of the Company's Common Stock
on the date of grant. The market value of the Company's Common Stock on
December 15, 1998 was $7.00. The term during which the option may be
exercised and whether the option will be exercisable immediately, in stages
or otherwise are set by the Committee, but the term of an incentive stock
option may not exceed ten years from the date of grant. Each incentive stock
option and, unless otherwise determined by the Committee, each nonqualified
stock option granted under the 1999 Plan is nontransferable during the
lifetime of the optionee. Each outstanding option under the 1999 Plan may
terminate earlier than its stated expiration date in the event of the
optionee's termination of employment or directorship.
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the 1999 Plan or revise or amend it in any respect; provided,
that no such revision or amendment may impair the terms and conditions of any
outstanding option to the material detriment of the optionee without the
consent of the optionee except as authorized in the event of merger,
consolidation or liquidation of the Company.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN. Under present law, an
optionee will not realize any taxable income on the date a nonqualified
option is granted pursuant to the 1999 Plan. Upon exercise of the option,
however, the optionee must recognize, in the year of exercise, ordinary
income equal to the difference between the option price and the fair market
value of the Company's Common Stock on the date of exercise. Upon the sale
of the shares, any resulting gain or loss will be treated as capital gain or
loss. The Company will receive an income tax deduction in its fiscal year in
which options are exercised, equal to the amount of ordinary income
recognized by those optionees exercising options, and must withhold income
and other employment-related taxes on such ordinary income.
Incentive stock options granted under the 1999 Plan are intended to
qualify for favorable tax treatment under Code Section 422. Under Section
422, an optionee recognizes no taxable income when the option is granted.
Further, the optionee generally will not recognize any taxable income when
the option is exercised if he or she has at all times from the date of the
option's grant until three months before the date of exercise been an
employee of the Company. The Company ordinarily is not entitled to any income
tax deductions upon the grant or exercise of an incentive stock option.
Certain other favorable tax consequences may be available to the optionee if
he or she does not dispose of the shares acquired upon the exercise of an
incentive stock option for a period of two years from the granting of the
option and one year from the receipt of the shares.
-12-
<PAGE>
PLAN BENEFITS. The table below shows the total number of stock options
that have been received by the following individuals and groups under the 1992
and 1994 Plans; no options have been granted under the 1999 Plan.
<TABLE>
<CAPTION>
Total number of
Name and Position/Group Options Received (1)
----------------------- --------------------
<S> <C>
Robert H. Kill, President and Chief Executive Officer 75,000
Current Executive Officer Group (3 persons) 165,643
Current Non-executive Officer Director Group (5 persons) 193,500(2)
Current Non-executive Officer Employee group (90 persons) 841,419
</TABLE>
- --------------------
(1) This table reflects the total stock options granted without taking into
account exercises or cancellations. Because future grants of stock options
are subject to the discretion of the Compensation Committee, the future
benefits that may be received by these individuals or groups under the 1999
Plan cannot be determined at this time, except for the automatic grants of
6,000 share options to outside directors as described under "Directors'
Formula Grant" above.
(2) Includes 6,000 share options which will be granted to Messrs. Deaner,
Soukup, Thomas and Wray on the date of the 1999 Annual Meeting pursuant to
the provisions of the 1999 Plan if the Plan is approved by the
shareholders, or pursuant to the existing terms of the 1992 Plan if the
1999 Plan is not approved.
VOTE REQUIRED
The Board of Directors recommends that the shareholders approve the 1999
Amended and Restated Stock Option Plan as a consolidation of the Company's
1992 Nonqualified and 1994 Incentive Stock Option Plans. Approval of the
1999 Plan requires the affirmative vote of the holders of a majority of the
voting power of the shares represented in person or by proxy at the meeting
with authority to vote on such matter.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors of the Company, and persons who beneficially own more
than 10 percent of the Company's outstanding shares of Common Stock, to file
initial reports of ownership and reports of changes in ownership of
securities of the Company with the Securities and Exchange Commission.
Officers, directors and greater than 10 percent shareholders are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
-13-
<PAGE>
Based upon a review of the copies of such reports furnished to or
obtained by the Company and upon other information known to the Company, the
Company believes that during the fiscal year ended September 30, 1998, all
filing requirements applicable to its directors, officers or beneficial
owners of more than 10% of the Company's outstanding shares of Common Stock
were complied with except that one report covering an option grant and a gift
was filed late by Robert H. Kill.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Effective August 11, 1997, the Company appointed Grant Thornton LLP as
the Company's independent auditors for the remainder of fiscal 1997. The
firm of KPMG Peat Marwick LLP previously served as the Company's auditors and
was dismissed on August 11, 1997 contemporaneously with the appointment of
Grant Thornton LLP. There were not, in connection with any prior audit or
any subsequent interim period preceding the selection of Grant Thornton LLP,
any disagreements with KPMG Peat Marwick LLP on any matter of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure, which disagreements if not resolved to the satisfaction of KPMG
Peat Marwick LLP would have caused it to make reference in connection with
its report to the subject matter of the disagreements, and the former
auditors' reports on the financial statements of the Company did not contain
any adverse opinion or disclaimer of opinion nor were they qualified as to
uncertainty, audit scope or accounting principles. The decision to change
auditors was recommended by the Audit Committee and approved by the Board of
Directors.
The Company has not yet selected its independent auditors for the
current fiscal year ending September 30, 1999. Representatives of Grant
Thornton LLP are expected to be present at the Annual Meeting, will be given
an opportunity to make a statement regarding financial and accounting matters
of the Company if they so desire, and will be available at the meeting to
respond to appropriate questions from the Company's shareholders.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If
any other matter properly comes before the meeting, the appointees named in
the proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 2000 annual meeting of shareholders must be
received by the Company by August 22, 1999, to be includable in the Company's
proxy statement and related proxy for the 2000 annual meeting. Shareholder
proposals intended to be presented at the 2000 annual meeting but not
-14-
<PAGE>
included in the Company's proxy statement and proxy will be considered
untimely if received by the Company after November 6, 1999.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1998, accompanies this notice of meeting and Proxy
Statement. No part of the Annual Report is incorporated herein and no part
thereof is to be considered proxy soliciting material.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES THERETO. THE
COMPANY WILL FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST
ACCOMPANYING THE FORM 10-KSB, UPON THE PAYMENT, IN ADVANCE, OF REASONABLE
FEES RELATED TO THE COMPANY'S FURNISHING SUCH EXHIBIT(S). REQUESTS FOR
COPIES OF SUCH REPORT AND/OR EXHIBITS(S) SHOULD BE DIRECTED TO MS. JOAN K.
BERG, VICE PRESIDENT OF FINANCE, AT THE COMPANY'S PRINCIPAL ADDRESS. THE
COMPANY'S FORM 10-K MAY ALSO BE ACCESSED THROUGH THE SEC'S WEBSITE AT
HTTP://WWW.SEC.GOV.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT H. KILL
CHAIRMAN AND PRESIDENT
Dated: December 21, 1998
Plymouth, Minnesota
-15-
<PAGE>
CIPRICO INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 28, 1999
The undersigned hereby appoints ROBERT H. KILL and JOAN K. BERG, and each of
them, with full power of substitution, as Proxies to represent and vote, as
designated below, all shares of Common Stock of Ciprico Inc. registered in the
name of the undersigned at the Annual Meeting of Shareholders of the Company to
be held at the Radisson Plaza Hotel, 35 South Seventh Street, Minneapolis,
Minnesota, at 3:30 p.m. (Minneapolis time) on January 28, 1999, and at any
adjournment thereof, and the undersigned hereby revokes all proxies previously
given with respect to the meeting.
The Board of Directors recommends that you vote FOR each proposal below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1. Set number of directors at six (6):
/ / FOR / / AGAINST / / ABSTAIN
2. Elect two Class II directors: [Nominees: Bruce J. Bergman and Ronald B. Thomas]
/ / FOR the nominees listed above / / WITHHOLD AUTHORITY to vote for
all nominees listed above
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME ON THE LINE BELOW
----------------------------------------------------------------------------------------------
3. Approve the 1999 Amended and Restated Stock Option Plan as a consolidation of the Company's 1992 Nonqualified Stock
Option Plan and 1994 Incentive Stock Option Plan and without the reservation of additional shares.
/ / FOR / / AGAINST / / ABSTAIN
4. OTHER MATTERS. In their discretion, the Proxies are ...
/ / AUTHORIZED / / NOT AUTHORIZED
to vote upon such other business as may properly come before the Meeting.
</TABLE>
(CONTINUED ON REVERSE SIDE)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL,
AND WILL BE DEEMED TO GRANT AUTHORITY UNDER PROPOSAL NUMBER 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date: ______________________, 199_
__________________________________
__________________________________
PLEASE DATE AND SIGN ABOVE exactly
as name appears at the left,
indicating, where appropriate,
official position or
representative capacity. For stock
held in joint tenancy, each joint
owner should sign.
<PAGE>
CIPRICO INC.
1999 AMENDED AND RESTATED
STOCK OPTION PLAN
On October 22, 1998, the Board of Directors of Ciprico Inc. adopted this
1999 Amended and Restated Stock Option Plan (the "Amended and Restated Plan" or
the "Plan") as a consolidation of the Ciprico Inc. 1992 Nonqualified Stock
Option Plan (the "1992 Plan") and the 1994 Incentive Stock Option Plan (the
"1994 Plan"). Subject to the shareholder approval requirements set forth in
Section 2, the terms and conditions of this Amended and Restated Stock Option
Plan shall govern all options granted after October 22, 1998. All nonqualified
and incentive stock options granted prior to such date shall be governed by the
terms and conditions of the 1992 Plan and the 1994 Plan, respectively, which
were in effect as of the date such options were granted, and shall not be
modified by the adoption of this Plan.
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Committee" shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board. If the
Company's securities are registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, then, to the extent necessary
for compliance with Rule 16b-3, or any successor provision, each of the
members of the Committee shall be a "non-employee director." Solely for
purposes of this Section 1(a), "non-employee director" shall have the same
meaning as set forth in Rule 16b-3, or any successor provision, as then in
effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
(b) The "Company" shall mean Ciprico Inc., a Delaware corporation.
(c) "Fair Market Value" as of any day shall mean (i) if such stock is
reported by the Nasdaq National Market or Nasdaq SmallCap Market or is
listed upon an established stock exchange or exchanges, the reported
closing price of such stock by the Nasdaq National Market or Nasdaq
SmallCap Market or on such stock exchange or exchanges on such date or, if
no sale of such stock shall have occurred on such date, on the next
preceding day on which there was a sale of stock; (ii) if such stock is not
so reported by the Nasdaq National Market or Nasdaq SmallCap Market or
listed upon an established stock exchange, the average of the closing "bid"
and "asked" prices quoted by the National Quotation Bureau, Inc. (or any
comparable reporting service) on such date or, if there are no quoted "bid"
and "asked" prices on such date, on the next preceding date for which there
are such quotes; or (iii) if such stock is not publicly traded as of such
date, the per share value as determined by the Board, or the Committee, in
its sole discretion by applying principles of valuation with respect to the
Company's Common Stock.
1
<PAGE>
(d) The "Internal Revenue Code" is the Internal Revenue Code of 1986,
as amended from time to time.
(e) "Non-Employee Director" shall mean members of the Board who are
not employees of the Company or any Subsidiary.
(f) The "Optionee" means (i) an employee of the Company or any
Subsidiary to whom an incentive stock option has been granted pursuant to
Section 9, (ii) a director (including a Non-Employee Director), employee or
officer of or consultant or advisor to the Company or any Subsidiary to
whom a nonqualified stock option has been granted pursuant to Section 10 or
(iii) a Non-Employee Director to whom a nonqualified stock option has been
granted pursuant to Section 15.
(g) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the total
voting power of the Company's outstanding stock.
(h) The "Plan" means the Ciprico Inc. 1999 Amended and Restated Stock
Option Plan, as amended hereafter from time to time, including the form of
Option Agreements as they may be modified by the Board from time to time.
(i) "Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 11) reserved for incentive and
nonqualified stock options pursuant to this Plan.
(j) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned,
directly or indirectly in an unbroken chain, by the Company.
(k) The "1992 Plan" means the Ciprico Inc. 1992 Nonqualified Stock
Option Plan.
(l) The "1994 Plan" means the Ciprico Inc. 1994 Incentive Stock
Option Plan.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and its
Subsidiaries by facilitating the retention of competent personnel and by
furnishing incentive to officers, directors, employees, consultants, and
advisors upon whose efforts the success of the Company and its Subsidiaries will
depend to a large degree.
2
<PAGE>
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, or any successor
provision, pursuant to Section 9 of this Plan, and through the granting of
nonqualified stock options pursuant to Section 10 of this Plan. Adoption of
this Plan shall be and is expressly subject to the condition of approval by the
shareholders of the Company within 12 months before or after the adoption of the
Plan by the Board of Directors. Options shall not be granted under this Plan
until such shareholder approval is obtained. If shareholder approval is not
obtained within such 12-month period, this Plan shall have no force and effect,
and all future nonqualified and incentive stock options shall be granted under
the Company's 1992 Plan and 1994 Plan, respectively.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time (collectively referred to as the
"Administrator"). The Administrator shall have all of the powers vested in it
under the provisions of the Plan, including but not limited to exclusive
authority (where applicable and within the limitations described in the Plan) to
determine, in its sole discretion, whether an incentive stock option or
nonqualified stock option shall be granted, the individuals to whom, and the
time or times at which, options shall be granted, the number of shares subject
to each option, the option price, and terms and conditions of each option. The
Administrator shall have full power and authority to administer and interpret
the Plan, to make and amend rules, regulations and guidelines for administering
the Plan, to prescribe the form and conditions of the respective stock option
and restricted stock option agreements (which may vary from Optionee to
Optionee) evidencing each option and to make all other determinations necessary
or advisable for the administration of the Plan. The Administrator's
interpretation of the Plan, and all actions taken and determinations made by the
Administrator pursuant to the power vested in it hereunder, shall be conclusive
and binding on all parties concerned.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith in connection with the administration
of the Plan. In the event the Board appoints a Committee as provided hereunder,
any action of the Committee with respect to the administration of the Plan shall
be taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
3
<PAGE>
SECTION 5.
PARTICIPANTS
The Administrator shall from time to time, at its discretion and without
approval of the shareholders, designate those employees and officers to whom
incentive stock options shall be granted pursuant to Section 9 of the Plan, and
those employees, officers, directors (including Non-Employee Directors),
consultants or advisors of the Company or of any Subsidiary to whom nonqualified
stock options shall be granted pursuant to Section 10 of the Plan; provided,
however, that consultants or advisors shall not be eligible to receive stock
options hereunder unless such consultant or advisor renders bona fide services
to the Company or Subsidiary and such services are not in connection with the
offer or sale of securities in a capital raising transaction. The Administrator
may grant additional incentive stock options and nonqualified stock options
under this Plan to some or all Optionees then holding options or may grant
options solely or partially to new Optionees. In designating Optionees, the
Administrator shall also determine the number of shares to be optioned to each
such Optionee. The Board may from time to time designate individuals as being
ineligible to participate in the Plan.
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized but
unissued shares of Stock. One Million Four Hundred Twenty-eight Thousand Five
Hundred and Eighty-two (1,428,582) shares of Stock shall be reserved and
available for stock options under the Plan, representing the total number of
shares originally reserved under the 1992 Plan and the 1994 Plan less the number
of shares issued upon exercise of options previously granted under the 1992 Plan
and the 1994 Plan; provided, however, that the total number of shares of Stock
reserved for options under this Plan shall be subject to adjustment as provided
in Section 11 of the Plan. In the event that any outstanding stock option
granted under the Plan, the 1992 Plan or the 1994 Plan for any reason expires or
is terminated prior to the exercise thereof, the shares of Stock allocable to
such portion of the option shall continue to be reserved for stock options under
the Plan and may be optioned hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time to
time after the effective date of the Plan and until October 22, 2008.
Nonqualified stock options may be granted pursuant to the Plan from time to time
after the effective date of the Plan and until the Plan is discontinued or
terminated by the Board. Any incentive stock option granted prior to October
22, 2008, and any nonqualified stock option granted prior to the termination of
the Plan by the Board shall remain in full force and effect until the expiration
of the option as specified in the
4
<PAGE>
written stock option agreement shall remain subject to the terms and
conditions of this Plan.
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of stock options granted
pursuant to this Plan with cash, personal check, certified check, previously
issued Common Stock of the Company valued at such Stock's then Fair Market
Value, or such other form of payment as may be authorized by the Administrator.
The Administrator may, in its sole discretion, limit the forms of payment
available to the Optionee and may exercise such discretion any time prior to the
termination of the option granted to the Optionee or upon any exercise of the
option by the Optionee.
With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Administrator and may vary from Optionee to Optionee; provided, however,
that each Optionee and each Option Agreement shall comply with and be subject to
the following terms and conditions:
(a) NUMBER OF SHARES AND OPTION PRICE. The Option Agreement shall
state the total number of shares covered by the incentive stock option. To
the extent required to qualify the Option as an incentive stock option
under Section 422 of the Internal Revenue Code, or any successor provision,
the option price per share shall not be less than one hundred percent
(100%) of the Fair Market Value of the Common Stock per share on the date
the Administrator grants the option; provided, however, that if an Optionee
owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of its Parent or any
Subsidiary, the option price per share of an incentive stock option granted
to such Optionee shall not be less than one hundred ten percent (110%) of
the Fair Market Value of the Common Stock per share on the date of the
grant of the option. The Administrator shall have full authority and
discretion in establishing the option price and shall be fully protected in
so doing.
(b) TERM AND EXERCISABILITY OF INCENTIVE STOCK OPTION. The term
during which any incentive stock option granted under the Plan may be
exercised shall be established in each case by the Administrator. To the
extent required to qualify the
5
<PAGE>
Option as an incentive stock option under Section 422 of the
Internal Revenue Code, or any successor provision, in no event shall
any incentive stock option be exercisable during a term of more than
10 years after the date on which it is granted; provided, however,
that if an Optionee owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the
Company or of its parent or any Subsidiary, the incentive stock
option granted to such Optionee shall be exercisable during a term of
not more than five years after the date on which it is granted.
The Option Agreement shall state when the incentive stock option
becomes exercisable and shall also state the maximum term during which the
option may be exercised. In the event an incentive stock option is
exercisable immediately, the manner of exercise of the option in the event
it is not exercised in full immediately shall be specified in the Option
Agreement. The Administrator may accelerate the exercisability of any
incentive stock option granted hereunder which is not immediately
exercisable as of the date of grant.
(c) NONTRANSFERABILITY. No incentive stock option shall be
transferable, in whole or in part, by the Optionee other than by will or by
the laws of descent and distribution. During the Optionee's lifetime, the
incentive stock option may be exercised only by the Optionee. If the
Optionee shall attempt any transfer of any incentive stock option granted
under the Plan during the Optionee's lifetime, such transfer shall be void
and the incentive stock option, to the extent not fully exercised, shall
terminate.
(d) NO RIGHTS AS SHAREHOLDER. An Optionee (or the Optionee's
successor or successors) shall have no rights as a shareholder with respect
to any shares covered by an incentive stock option until the date of the
issuance of a stock certificate evidencing such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 11 of the Plan).
(e) OTHER PROVISIONS. The Option Agreement authorized under this
Section 9 shall contain such other provisions as the Administrator shall
deem advisable. Any such Option Agreement shall contain such limitations
and restrictions upon the exercise of the option as shall be necessary to
ensure that such option will be considered an "incentive stock option" as
defined in Section 422 of the Internal Revenue Code or to conform to any
change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to this Section 10 shall be
evidenced by a written Option Agreement. The Option Agreement shall be in such
form as may be approved from time to time by the Administrator and may vary from
Optionee to Optionee; provided,
6
<PAGE>
however, that each Optionee and each Option Agreement shall comply with and
be subject to the following terms and conditions:
(a) NUMBER OF SHARES AND OPTION PRICE. The Option Agreement shall
state the total number of shares covered by the nonqualified stock option.
Unless otherwise determined by the Administrator, the option price per
share shall be one hundred percent (100%) of the Fair Market Value of the
Common Stock per share on the date the Administrator grants the option;
provided, however, that the option price may not be less than eighty-five
percent (85%) of the Fair Market Value of the Common Stock per share on the
date of grant.
(b) TERM AND EXERCISABILITY OF NONQUALIFIED STOCK OPTION. The term
during which any nonqualified stock option granted under the Plan may be
exercised shall be established in each case by the Administrator. The
Option Agreement shall state when the nonqualified stock option becomes
exercisable and shall also state the maximum term during which the option
may be exercised. In the event a nonqualified stock option is exercisable
immediately, the manner of exercise of the option in the event it is not
exercised in full immediately shall be specified in the Option Agreement.
The Administrator may accelerate the exercisability of any nonqualified
stock option granted hereunder which is not immediately exercisable as of
the date of grant.
(c) WITHHOLDING. The Company or its Subsidiary shall be entitled to
withhold and deduct from future wages of the Optionee all legally required
amounts necessary to satisfy any and all withholding and employment-related
taxes attributable to the Optionee's exercise of a nonqualified stock
option. In the event the Optionee is required under the Option Agreement
to pay the Company, or make arrangements satisfactory to the Company
respecting payment of, such withholding and employment-related taxes, the
Administrator may, in its discretion and pursuant to such rules as it may
adopt, permit the Optionee to satisfy such obligation, in whole or in part,
by electing to have the Company withhold shares of Common Stock otherwise
issuable to the Optionee as a result of the option's exercise equal to the
amount required to be withheld for tax purposes. Any stock elected to be
withheld shall be valued at its Fair Market Value, as of the date the
amount of tax to be withheld is determined under applicable tax law. The
Optionee's election to have shares withheld for this purpose shall be made
on or before the date the option is exercised or, if later, the date that
the amount of tax to be withheld is determined under applicable tax law.
Such election shall be approved by the Administrator and otherwise comply
with such rules as the Administrator may adopt to assure compliance with
Rule 16b-3, or any successor provision, as then in effect, of the General
Rules and Regulations under the Securities Exchange Act of 1934, if
applicable.
(d) TRANSFERABILITY. The Administrator may, in its sole discretion,
permit the Optionee to transfer any or all nonqualified stock options to
any member of the Optionee's "immediate family" as such term is defined in
Rule 16a-1(e) promulgated under the Securities Exchange Act of 1934, or any
successor provision, or to one or more trusts whose beneficiaries are
members of such Optionee's "immediate family" or
7
<PAGE>
partnerships in which such family members are the only partners;
provided, however, that the Optionee cannot receive any consideration
for the transfer and such transferred nonqualified stock option shall
continue to be subject to the same terms and conditions as were
applicable to such nonqualified stock option immediately prior to its
transfer.
(e) NO RIGHTS AS SHAREHOLDER. An Optionee (or the Optionee's
successor or successors) shall have no rights as a shareholder with respect
to any shares covered by a nonqualified stock option until the date of the
issuance of a stock certificate evidencing such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 11 of the Plan).
(f) OTHER PROVISIONS. The Option Agreement authorized under this
Section 10 shall contain such other provisions as the Administrator shall
deem advisable.
SECTION 11.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of Common
Stock resulting from a subdivision or consolidation of shares or the payment of
a stock dividend or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company, the
number of shares of Stock reserved under Section 6 hereof, the number of shares
of Stock covered by each outstanding stock option and the price per share
thereof, and the number of shares subject to automatic grants to Non-Employee
Directors pursuant to Section 15 below shall be automatically adjusted to
reflect such change; provided, that the Board in its discretion may in such
event decrease but not increase the number of shares subject to the automatic
grants of Section 15 below made subsequent to the date of such event.
Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to
which the adjustment relates.
Unless otherwise provided in the Option Agreement, in the event of an
acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture or liquidation of the Company (collectively referred to as
a "transaction"), the Board may provide for one or more of the following:
(a) the equitable acceleration of the exercisability of any
outstanding options hereunder;
(b) the complete termination of this Plan and the cancellation of
outstanding options not exercised prior to a date specified by the Board
(which date shall give
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Optionees a reasonable period of time in which to exercise the options
prior to the effectiveness of such transaction);
(c) that Optionees holding outstanding stock options shall receive,
with respect to each share of Stock subject to such options, as of the
effective date of any such transaction, cash in an amount equal to the
excess of the Fair Market Value of such Stock on the date immediately
preceding the effective date of such transaction over the option price per
share of such options; provided that the Board may, in lieu of such cash
payment, distribute to such Optionees shares of stock of the Company or
shares of stock of any corporation succeeding the Company by reason of such
transaction, such shares having a value equal to the cash payment herein;
or
(d) the continuance of the Plan with respect to the exercise of
options which were outstanding as of the date of adoption by the Board of
such plan for such transaction and provide to Optionees holding such
options the right to exercise their respective options as to an equivalent
number of shares of stock of the corporation succeeding the Company by
reason of such transaction.
The Board may restrict the rights of or the applicability of this Section 11 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code or any other applicable law or regulation.
The grant of an option pursuant to the Plan shall not limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 12.
SECURITIES LAW COMPLIANCE
No shares of Common Stock shall be issued pursuant to the Plan unless and
until there has been compliance, in the opinion of Company's counsel, with all
applicable legal requirements, including without limitation, those relating to
securities laws and stock exchange listing requirements. As a condition to the
issuance of Stock to Optionee, the Administrator may require Optionee to (i)
represent that the shares of Stock are being acquired for investment and not
resale and to make such other representations as the Administrator shall deem
necessary or appropriate to qualify the issuance of the shares as exempt from
the Securities Act of 1933 and any other applicable securities laws, and (ii)
represent that Optionee shall not dispose of the shares of Stock in violation of
the Securities Act of 1933 or any other applicable securities laws.
As a further condition to the grant of any stock option or the issuance of
Stock to Optionee, Optionee agrees to the following:
(a) In the event the Company advises Optionee that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, and the underwriter(s) seek to impose
restrictions under which certain
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shareholders may not sell or contract to sell or grant any option to
buy or otherwise dispose of part or all of their stock purchase
rights of the underlying Common Stock, Optionee will not, for a
period not to exceed 180 days from the prospectus, sell or contract
to sell or grant an option to buy or otherwise dispose of any stock
option granted to Optionee pursuant to the Plan or any of the
underlying shares of Common Stock without the prior written consent
of the underwriter(s) or its representative(s).
(b) In the event of a transaction (as defined in Section 11 of the
Plan) which is treated as a "pooling of interests" under generally accepted
accounting principles, Optionee will comply with Rule 145 of the Securities
Act of 1933 and any other restrictions imposed under other applicable legal
or accounting principles if Optionee is an "affiliate" (as defined in such
applicable legal and accounting principles) at the time of the transaction,
and Optionee will execute any documents necessary to ensure compliance with
such rules.
The Company reserves the right to place a legend on any stock certificate
issued upon exercise of an option granted pursuant to the Plan to assure
compliance with this Section 12.
SECTION 13.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 11, shall
impair the terms and conditions of any stock option which is outstanding on the
date of such revision or amendment to the material detriment of the Optionee
without the consent of the Optionee. Notwithstanding the foregoing, no such
revision or amendment shall (i) materially increase the number of shares subject
to the Plan except as provided in Section 11 hereof, (ii) change the designation
of the class of employees eligible to receive stock options, (iii) decrease the
price at which options may be granted, or (iv) materially increase the benefits
accruing to Optionees under the Plan without the approval of the shareholders of
the Company if such approval is required for compliance with the requirements of
any applicable law or regulation. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause incentive
stock options to fail to meet the requirements of Section 422 of the Internal
Revenue Code.
SECTION 14.
NO OBLIGATION TO EXERCISE OPTION
The granting of a stock option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of a stock option hereunder
shall not impose upon the Company or any Subsidiary any obligation to retain the
Optionee in its employ for any period.
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SECTION 15.
NONQUALIFIED STOCK OPTIONS FOR OUTSIDE DIRECTORS
(a) AUTOMATIC GRANTS. No person shall have any discretion to select
the non-employee directors that shall be eligible for nonqualified stock
options or to determine the number of shares of Common Stock to be subject
to such options, the option price per share, the term and exercisability
for such options or the date of grant. No action by the Board of Directors
or the Committee shall be required for the grant of nonqualified stock
options under this Section 15, it being the intention of the Company that
such stock option grants will occur automatically.
(b) ANNUAL GRANTS TO NON-EMPLOYEE DIRECTORS. Each Non-Employee
Director who, on and after the date this Plan is approved by the Company's
shareholders, is elected or re-elected as a director of the Company or
whose term of office continues after a meeting of shareholders at which
directors are elected shall, as of the date of such election, re-election
or shareholders meeting, automatically be granted a nonqualified option to
purchase 6,000 shares of the Company's Common Stock; provided, however, if
such Non-Employee Director is elected other than by shareholders at an
annual meeting, the number of shares subject to the option shall be
determined by multiplying 6,000 by a fraction, the numerator of which is
the number of months until the next regular annual meeting of shareholders
and the denominator of which is 12.
(c) EXERCISE PRICE. The exercise price per share for each
nonqualified stock option granted pursuant to this Section 15 shall be
equal to the Fair Market Value of the Company's Common Stock per share on
the date of such election, re-election or annual meeting.
(d) TERM AND EXERCISABILITY. Each nonqualified stock option granted
pursuant to this Section 15 shall become exercisable one year from the date
of grant if the Optionee has served as a director throughout such period,
and shall expire seven (7) years from the date of grant. Each nonqualified
stock option granted pursuant to this Section 15 shall be subject to such
additional terms and conditions not inconsistent with this Plan as the
Option Agreement issued to the Optionee by the Company may contain.
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