SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of
[x] Definitive proxy statement the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CYBER DIGITAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(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:
(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>
CYBER DIGITAL, INC.
400 OSER AVENUE
SUITE 1650
HAUPPAUGE, NEW YORK 11788
(516) 231-1200
October 10, 1997
To Our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Cyber Digital, Inc. (the "Company"), which will be held at the
Holiday Inn, 3845 Veterans Memorial Highway, Ronkonkoma, New York, on November
7, 1997, at 10:00 A.M., Eastern Standard Time.
The Notice of Annual Meeting of Shareholders and the Proxy Statement
covering the formal business to be conducted at the Annual Meeting follow this
letter.
We hope you will attend the Annual Meeting in person. Whether or not
you plan to attend, please complete, sign, date and return the enclosed proxy
promptly in the accompanying reply envelope to assure that your shares are
represented at the meeting.
Sincerely yours,
/s/ J.C. Chatpar
----------------
J.C. Chatpar
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
CYBER DIGITAL, INC.
400 OSER AVENUE
SUITE 1650
HAUPPAUGE, NEW YORK 11788
(516) 231-1200
------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 7, 1997
------------------------------------
The Annual Meeting of Shareholders of Cyber Digital, Inc. (the
"Company") will be held at the Holiday Inn, 3845 Veterans Memorial Highway,
Ronkonkoma, New York, at 10:00 A.M., Eastern Standard Time, on November 7, 1997
for the following purposes:
1. To elect five directors to serve until the next Annual Meeting
of Shareholders and until their respective successors have been duly
elected and qualified.
2. To approve the Cyber Digital, Inc. 1997 Stock Incentive Plan
and the grants of options to non-employee directors of the Company to
purchase an aggregate of 40,000 shares of the Common Stock of the
Company.
3. To ratify the appointment of Albrecht, Viggiano, Zureck &
Company, P.C. as independent public auditors for the Company's fiscal
year ending March 31, 1998.
4. To transact such other business as may be properly brought
before the meeting and any adjournment or postponement thereof.
Shareholders of record at the close of business on October 8, 1997 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof. Whether or not you plan to attend the Annual Meeting,
please complete, sign, date and return the enclosed proxy in the reply envelope
provided which requires no postage if mailed in the United States. Shareholders
attending the Annual Meeting may vote in person even if they have returned a
proxy. By promptly returning your proxy, you will greatly assist us in preparing
for the Annual Meeting.
By Order of the Board of Directors
/s/ J.C. Chatpar
----------------
J.C. Chatpar
Chairman of the Board, President and
Chief Executive Officer
Hauppauge, New York
October 10, 1997
<PAGE>
CYBER DIGITAL, INC.
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 7, 1997
This Proxy Statement and the enclosed form of proxy are being
furnished, commencing on or about October 10, 1997, in connection with the
solicitation of proxies in the enclosed form by the Board of Directors of Cyber
Digital, Inc., a New York corporation (the "Company"), for use at the Annual
Meeting (the "Annual Meeting") of Shareholders of the Company (the
"Shareholders") to be held at the Holiday Inn, 3845 Veterans Memorial Highway,
Ronkonkoma, New York, at 10:00 A.M., Eastern Standard Time, on November 7, 1997,
and at any adjournment(s) or postponement(s) thereof, for the purposes set forth
in the foregoing Notice of Annual Meeting of Shareholders.
The annual report of the Company, containing financial statements of
the Company as of March 31, 1997 and for the year then ended, and other
information concerning the Company, is included with this Proxy Statement.
A list of the Shareholders entitled to vote at the Annual Meeting will
be available for examination by Shareholders during ordinary business hours, for
a period of ten days prior to the Annual Meeting, at the offices of the Company,
400 Oser Avenue, Suite 1650, Hauppauge, New York 11788. A Shareholders list will
also be available for examination at the Annual Meeting.
If you are unable to attend the Annual Meeting, you may vote by proxy
on any matter to come before that meeting. The enclosed proxy is being solicited
by the Board of Directors. Any proxy given pursuant to such solicitation and
received in time for the Annual Meeting will be voted as specified in such
proxy. If no instructions are given, proxies will be voted (i) FOR the election
of the nominees named below under the caption "Election of Directors," (ii) FOR
the approval of the Cyber Digital, Inc. 1997 Stock Incentive Plan (the "1997
Plan") and the grants of options to a non-employee director of the Company to
purchase an aggregate of 40,000 shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), (iii) FOR the ratification of the
appointment of Albrecht, Viggiano, Zureck & Company, P.C., as independent public
auditors for the Company's fiscal year ending March 31, 1997 and (iv) in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the Annual Meeting. Attendance in person at the
Annual Meeting will not of itself revoke a proxy; however, any Shareholder who
does attend the Annual Meeting may revoke a proxy orally and vote in person.
Proxies may be revoked at any time before they are voted by sending a written
notice of revocation or another signed proxy with a later date to the Secretary
of the Company, at the Company's principal executive office.
Following the original mailing of proxy solicitation material,
executives and other employees of the Company and professional proxy solicitors,
may solicit proxies by mail, telephone, telegraph and personal interview.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries who are record holders of the Common Stock, to forward
proxy solicitation material to the beneficial owners of such stock, and the
Company may reimburse such record holders for their reasonable expenses incurred
in such forwarding. The cost of soliciting proxies in the enclosed form will be
borne by the Company.
The holders of a majority of the outstanding shares entitled to vote,
present in person or represented by proxy, will constitute a quorum for the
transaction of business. Shares represented by proxies that are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum on all matters. Brokers holding shares for beneficial owners in "street
name" must vote those shares according to specific instructions they receive
from the owners. If instructions are not received, brokers may vote the shares,
in their
<PAGE>
discretion, depending on the type of proposals involved. "Broker non-votes"
result when brokers are precluded from exercising their discretion on certain
types of proposals. However, brokers have discretionary authority to vote on
certain "routine" matters submitted to the Shareholders. All matters being
proposed at the Annual Meeting are considered "routine" matters. Shares that are
voted by brokers on some but not all of the matters will be treated as shares
present for purposes of determining the presence of a quorum on all matters, but
will not be treated as shares entitled to vote at the Annual Meeting on those
matters as to which authority to vote is withheld by the owner.
The election of each nominee for Director requires a plurality of the
votes cast at the Annual Meeting (whether in person or by proxy) by the holder
of shares entitled to vote thereon. The affirmative vote of a majority of the
votes cast at the Annual Meeting (whether in person or by proxy) by the holders
of shares entitled to vote thereon is required for the approval of the remaining
proposals. Because broker non-votes and abstentions will not be treated as
shares that are voted with respect to a specific proposal, broker non-votes and
abstentions will have no effect on the outcome.
The Company has appointed an inspector to act at the Annual Meeting who
shall: (1) ascertain the number of shares outstanding and the voting powers of
each; (2) determine the shares represented at the Annual Meeting and the
validity of the proxies and ballots; (3) count all votes and ballots; (4)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determinations by such inspector; and (5) certify his
determination of the number of shares represented at the Annual Meeting and his
count of all votes and ballots.
Only Shareholders of record at the close of business on October 8, 1997
are entitled to notice of, and to vote at, the Annual Meeting, and any
adjournment(s) or postponement(s) thereof. As of the close of business on
October 8, 1997, there were 17,287,711 shares of Common Stock outstanding. Each
share of Common Stock entitles the record holder thereof to one vote on all
matters properly brought before the Annual Meeting and any adjournment(s) or
postponement(s) thereof, with no cumulative voting.
- 2 -
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
GENERAL
At the Annual Meeting, the Shareholders will elect five directors
(which number shall constitute the entire Board of Directors of the Company), to
hold office until the next Annual Meeting of Shareholders and until their
respective successors shall have been duly elected and qualified.
The Board of Directors has submitted five nominees for director. No
other nominations were submitted. The Board of Directors has no reason to
believe that the nominees named will be unable to serve if elected. However, in
the event that any nominee is unable or declines to serve as a director, the
proxies designating the Board's nominees may be voted for the election of such
other persons as the Board of Directors may recommend. Each of the nominees has
consented to being named in this Proxy Statement and to serve if elected.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES NAMED BELOW.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The nominees for election to the Board of Directors of the Company, and
certain information regarding such nominees, including their principal
occupations and business experience for at least the past five years, are as
follows:
NAME AGE OFFICE
Jawahar C. Chatpar 50 Chairman of the Board, President,
and Chief Executive Officer
Jack P. Dorfman 60 Director and Secretary
Jatinder V. Wadhwa 63 Director and Treasurer
Terry L. Jones 50 Nominee
Khushi A. Nichani 60 Nominee
Directors are elected by the Shareholders to serve one year terms or
until their successors shall have been duly elected and qualified.
Jawahar C. Chatpar is a founder of the Company and has served as
Chairman of the Board, Chief Executive Officer and President since March 1991,
as Chairman of the Board, Chief Executive Officer and Secretary from November
1986 until March 1991, and as President and Chief Executive Officer from
inception until November 1986. Mr. Chatpar has also served as a Director since
inception. Mr. Chatpar founded the Company in 1983 as a successor to a Canadian
corporation of the same name which he founded in 1982. From 1980 to 1982, Mr.
Chatpar was employed by Bayly Engineering Limited, a manufacturer of digital
telecommunication systems and a member of A.E.G. Telefunken Group, as a Manager
of Digital Transmission
- 3 -
<PAGE>
and Fiber Optics Engineering (research and development). From 1974 to 1980, Mr.
Chatpar served in various engineering, management and marketing positions with
Northern Telecom. He holds an M.S. degree in Electrical Engineering from the
University of Waterloo.
Jack P. Dorfman joined the Company as a Director in November 1993, and
has served as Secretary since October 1995. Mr. Dorfman has been retired since
June 1996. Prior thereto, since 1992, Mr. Dorfman served as consultant and
manager for a number of pharmacies. From 1990 to 1992, he served as a management
consultant for Clark Container, a division of Mark IV Industries, a
conglomerate. From 1988 to 1990, he served as Vice President and Treasurer of US
Distribution, a transportation company. Prior to 1988, he owned, managed and
operated an independent community pharmacy for over fifteen years.
Jatinder V. Wadhwa has served as a Director of the Company since 1986
and as Treasurer of the Company since August 1997. He had been the Secretary of
the Company from 1993 to 1995. Since 1994, Mr. Wadhwa has served as the Chief
Executive Officer of Security First Financial Corp., a financial institution
dealing with first and second mortgages on residential and commercial
properties. From 1989 to 1994, Mr. Wadhwa had served as a management consultant
to Gibbons Goodwin van Amerogen, an investment banking firm, Wells Aluminum
Corporation, a manufacturer of aluminum extrusion products and Sealy Mattress
Company. From 1970 to 1990, Mr. Wadhwa had served as Chief Operating Officer and
Vice President of Operations of EZ Por Corporation, a manufacturer of aluminum
products.
Terry L. Jones, a nominee, has been the President of Syndicated
Communications, Inc. ("Syncom"), a communications venture capital investment
company, since 1990. He joined Syncom in 1978 as a Vice President. Mr. Jones
serves in various capacities, including director, president, general partner and
vice president for various other entities affiliated with Syncom. He also serves
on the Board of Directors of Radio One, Inc. Mr. Jones earned his B.S. degree
from Trinity College, his M.S. from George Washington University and his M.B.A.
from Harvard Business School.
Khushi A. Nichani, a nominee, has been a commercial manager at Black &
Veatch Incorporated, an engineering and architectural firm for power industrial
projects, since May 1997, where his responsibilities included negotiating orders
for turnkey power plants. From 1973 to May 1997, he held various positions (most
recently as Manager of Proposals & Estimating) at GE Co. Power Generation, the
power project division of General Electric.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES.
During the fiscal year ended March 31, 1997 ("fiscal 1997"), the Board
of Directors met four times. During such fiscal year, each incumbent director
attended at least 75% of the meetings of the Board of Directors. The Board does
not have any committees.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
for services in all capacities for the fiscal years ended March 31, 1997, 1996
and 1995, of those persons who were, at March 31, 1997, the chief executive
officer and the most highly compensated executive officers of the Company
(collectively, the "Named Officers"). Except for J.C. Chatpar, no executive
officer of the Company received compensation in excess of $100,000 in fiscal
1997, 1996 or 1995.
- 4 -
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
Other
Name and Annual Restricted Securities All
Principal Fiscal Compensation Stock Underlying Other
Position(1) Year Salary($) Bonus($) ($)(1) Awards($) Options(#) Compensation($)
----------- ---- --------- -------- ------ --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
J.C. Chatpar 1997 $130,000(2) $100,000 None None None None
Chairman of the Board,
President and CEO 1996 $80,000 None None None 440,000 None
1995 $80,000 None None None None None
- -----------------
</TABLE>
(1) The Company has concluded that the aggregate amount of perquisites and
other personal benefits paid to each of the Named Officers did not exceed
the lesser of (i) 10% of such officer's total annual salary and bonus for
fiscal 1997, 1996 and 1995, respectively, and (ii) $50,000. Thus, such
amounts are not reflected in the table.
(2) Mr. Chatpar's salary was raised from $80,000 per annum to $150,000 per
annum, effective August 12, 1996.
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the number of
unexercised options and the fiscal 1997 year-end value of unexercised options on
an aggregated basis held by the Named Officers. The Company has not granted any
stock appreciation rights and no options were exercised in fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)(1)
------------------------------ ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
J.C. Chatpar 480,000 0 $375,000 0
</TABLE>
- ------------------
(1) Options are "in-the-money" if, on March 31, 1997, the market price of the
Common Stock ($1.81) exceeded the exercise price of such options. The value
of such options is calculated by determining the difference between the
aggregate market price of the Common Stock underlying the options on March
31, 1997 and the aggregate exercise price of such options.
COMPENSATION OF DIRECTORS
The directors of the Company are paid $250 per Board meeting. In
addition, the Company currently reimburses each director for expenses incurred
in connection with his or her attendance at each meeting of the Board of
Directors or a committee on which he or she serves.
- 5 -
<PAGE>
EMPLOYMENT AGREEMENTS AND INSURANCE
The Company has entered into an Amended and Restated Employment
Agreement with Mr. Chatpar, dated as of August 4, 1997 (the "Employment
Agreement") for a three-year term. Such three-year term shall be automatically
extended for successive three-year terms unless either party gives the other
party 120 days prior written notice of termination before the end of any such
three-year period. The Board, however, has the authority to terminate such
extension upon cause. "Cause" is defined as conviction of a felony or willful
misconduct. Mr. Chatpar is entitled to receive a salary of $150,000 per annum,
with an annual increase of 10%. In recognition of the complex scientific and
technical leadership which Mr. Chatpar brings to the Company, the Company has
also agreed that its Board of Directors may raise his salary during the term of
his employment as soon as the financial resources of the Company and other
business conditions permit. In such event, Mr. Chatpar's salary shall be at a
level comparable to that of chief executive officers of other comparable
technology-driven publicly held companies.
In addition, to his base salary, Mr. Chatpar shall be entitled to
receive a cash bonus based upon the following formula: (a) 1% of gross revenues
for each fiscal year in excess of $3 million, provided, however, that the
Company shall be profitable, plus (b) 5% of net income after deduction of the
bonus provided for in (a) above, plus (c) 10% of the increase in net income over
that of the prior fiscal year after deduction of the bonus provided for in (a)
above.
In the event of a termination of Mr. Chatpar's employment due to
disability, he shall receive royalty payments of 5% of the gross revenues earned
by the Company ("Royalties") for a period of 15 years following termination. In
the event of Mr. Chatpar's death, his wife, if any, or his estate, shall receive
a payment equal to six months of his base salary and Royalties for 15 years. In
the event of a termination of Mr. Chatpar's employment for any reason other than
pursuant to disability, death or for cause, or if there is a change of control
(as defined in the Employment Agreement) of the Company which results in an
actual or constructive termination of employment (as defined therein), he shall
receive a payment equal to three years of his base salary plus three times his
prior year's bonus, Royalties for 15 years, and all of his outstanding options
will be deemed immediately vested and exercisable for a period of one year from
the effective termination date.
The Company does not have employment contracts with any other officer
or director. The Company currently maintains a $500,000 term life insurance
policy on the life of Mr. Chatpar with benefits payable to the Company. The
Company offers basic health, major medical and life insurance to its employees.
No retirement, pension or similar program has been adopted by the Company.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Common Stock as of October 8, 1997, for
(i) each person or group that is known by the Company to be a beneficial owner
of more than 5% of the outstanding shares of Common Stock, (ii) each of the
Named Officers, directors and nominees, and (iii) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the Company
believes that such beneficial owners, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws, where applicable.
- 6 -
<PAGE>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY OF
BENEFICIAL OWNER OWNED CLASS(1)(2)
---------------- ----- -----------
Jawahar C. Chatpar (3) 5,315,712 28.4%
c/o Cyber Digital, Inc.
400 Oser Avenue, Suite 1650
Hauppauge, NY 11788
Jack P. Dorfman(4) 170,000 *
Jatinder V. Wadhwa (5) 167,812 *
Terry L. Jones 0 (6) 0
Khushi A. Nichani 8,000 *
All directors and executive officers as a
group (3 persons) 5,653,524 30.0%
- ---------------------
* less than 1%
(1) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person or group of persons named above, any security
which such person or persons have or have the right to acquire within 60
days is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(2) Assumes the exercise of the warrants to purchase 824,013 shares of Common
Stock issued in connection with the offering of the Company's Series A
preferred stock.
(3) Does not include 476,000 shares owned by Sylvie Chatpar, his wife and
175,000 shares owned by certain other relatives, as to which shares
beneficial ownership is disclaimed. Includes 590,000 shares as to which Mr.
Chatpar holds a non-qualified option, which are exercisable at any time.
(4) Includes 50,000 shares as to which Mr. Dorfman holds a nonqualified option,
which are exercisable at any time. Does not include 360,000 owned by his
wife, Sandra Dorfman, as to which beneficial ownership is disclaimed.
(5) Includes 80,000 shares as to which Mr. Wadhwa holds nonqualified stock
options which are exercisable at any time.
(6) Terry Jones is the general partner of a limited partnership that is the
general partner of Syndicated Communications Venture Partners III, L.P.
("Syncom III"), a fund which owns all of the 2,000 shares of the Company's
Series B convertible preferred stock currently outstanding. Such shares are
convertible into shares of Common Stock no earlier than December 30, 1997.
See "Certain Relationships and Related Transactions" below.
- 7 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 30, 1996, the Company consummated a private placement of
its Series B Convertible Preferred Stock, par value $.05 per share (the "Series
B Stock"), to Syncom III. The Company issued 2,000 shares of its Series B Stock
to Syncom III in return for $2,000,000. Such shares are convertible into shares
of Common Stock commencing one year from the closing date. The conversion price
is the lesser of either eighty-five (85%) per cent of the average closing price
during the five trading days preceding the conversion date or $7.50 per share.
All shares of Series B Stock shall automatically be converted into Common Stock
on December 21, 2001.
Terry Jones, a nominee, is the general partner of WJM Partners III,
L.P. ("WJM"), the general partner of Syncom III. Pursuant to the terms of the
Stock Purchase Agreement entered into in connection with such placement, so long
as Syncom III holds at least 750 shares of Series B Stock and/or Common Stock
issued upon conversion of such shares of Series B Stock, or any combination
thereof, the Company's Board of Directors shall consist of not less than five
members and the Company shall use its best efforts to cause Terry Jones (or
another partner of WJM) to be elected as a director.
PROPOSAL 2: APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN
AND GRANTS OF STOCK OPTIONS TO INDEPENDENT DIRECTORS
There will be presented to the meeting a proposal to approve the 1997
Plan and the grants by the Company to a non-employee director of the Company of
nonqualified ten-year options to purchase an aggregate of 40,000 shares of
Common Stock at an exercise price of $1.00 per share (the "Independent Director
Options"). The 1997 Plan was adopted by the Company's Board of Directors on
August 4, 1997, subject to the approval of the Shareholders. The affirmative
vote of the holders of a majority of the votes cast at the Annual Meeting
(whether in person or by proxy) entitled to vote thereon is required for the
approval of the 1997 Plan and the grants of the Independent Director Options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997
PLAN AND THE GRANTS OF THE INDEPENDENT DIRECTOR OPTIONS.
GENERAL
The following summary of the 1997 Plan is qualified in its entirety by
reference to the full text of the 1997 Plan, which is attached hereto as Exhibit
A.
The purpose of the 1997 Plan is to provide certain directors, officers
and other key employees and consultants of the Company, as the Company's Stock
Option Committee or, if no such committee exists, the Board of Directors (the
"Committee"), shall in its discretion select, with additional incentives by
providing them with the opportunity to increase their ownership interests in the
Company. The 1997 Plan, like the Company's 1993 Stock Incentive Plan (the "1993
Plan"), is designed to attract and retain qualified persons as directors,
officers and key employees of the Company so as to maintain and enhance the
Company's long-term performance. As of August 6, 1997, options to purchase an
aggregate of 868,000 shares of Common Stock had been granted under the 1993
Plan, leaving only 5,375 shares of Common Stock reserved for issuance upon the
grant of options under the 1993 Plan. Thus, the Board of Directors unanimously
adopted the 1997 Plan as being in the best long-term interest of the Company and
its Shareholders. The maximum number of shares of Common Stock subject to awards
granted under the 1997 Plan is 850,999 shares, which may be authorized but
unissued shares, treasury shares or shares acquired by the Company for purposes
of the 1997 Plan. In the event
- 8 -
<PAGE>
of a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock or the like, the Committee will
proportionately adjust the number of shares covered by each outstanding award,
the number of shares available under the 1997 Plan and the exercise prices of
outstanding awards. Awards under the 1997 Plan may be made in the form of (i)
incentive stock options ("ISOs"), (ii) nonqualified stock options (ISOs and
nonqualified stock options are collectively referred to as "options"), (iii)
stock appreciation rights ("SARs"), (iv) dividend equivalent rights, (v)
restricted stock, (vi) restricted stock units and (vii) other stock-based
awards. Awards may be made to such directors, officers and other employees of
the Company, and to such consultants to the Company, as the Company shall in its
discretion select (collectively "key persons").
The Board of Directors may, without shareholder approval, suspend,
discontinue, revise or amend the 1997 Plan at any time or from time to time;
provided, however, that shareholder approval shall be obtained for any amendment
for which such approval is required by Section 422 of the Code or under other
applicable law. The Committee may amend any outstanding award, including,
without limitation, by amendment which would accelerate the time or times at
which the award becomes unrestricted or may be exercised, or waive or amend any
goals, restrictions or conditions on the award. Any amendments that materially
impair any rights or materially increase any obligations of a grantee under an
outstanding award shall be made only with the consent of the grantee.
GRANTS UNDER THE 1997 PLAN
Stock Options. Each stock option granted under the 1997 Plan will be
exercisable during the period fixed by the Committee; however, no ISO may be
exercised more than ten years after the date of grant. Unless the Committee
expressly provides otherwise, an option will become exercisable as to 25% of the
shares subject thereto on each of the first through fourth anniversaries of the
date of grant. The purchase price per share payable upon the exercise of an
option (the "option exercise price") will be established by the Committee,
provided that the option exercise price of an ISO shall be no less than 100% of
the fair market value of a share of Common Stock on the date of grant. The
option exercise price is payable in cash, or, with the consent of the Committee,
by surrender of shares of Common Stock acquired at least six months prior to the
option exercise date and having a fair market value on the date of the exercise
equal to part or all of the option exercise price, or by such other payment
method as the Committee may prescribe. The Committee may provide that, in the
event an optionee pays the option exercise price by surrender of shares held at
least six months, an additional option will be granted for a number of shares
equal to the number surrendered, with an option exercise price equal to fair
market value at the date of surrender and an expiration date no later than the
expiration date of the original option.
Stock Appreciation Rights. SARs may be granted in connection with all
or any part of, or independently of, any option granted under the 1997 Plan. The
grantee of an SAR has the right to surrender the SAR and to receive from the
Company an amount equal to the aggregate appreciation (since the date of the
grant, or over the option exercise price if the SAR is granted in connection
with an option) in the shares of Common Stock in respect of which such SAR is
being exercised. Payment due upon exercise of an SAR may be in cash, in Common
Stock, or partly in each, as determined by the Committee in its discretion.
Restricted Stock. The Committee may grant restricted shares of Common
Stock to such key persons, in such amounts, and subject to such terms and
conditions as the Committee shall determine in its discretion. Certificates for
the shares of Common Stock covered by a restricted stock award will remain in
the possession of the Company until such shares are free of restrictions.
Subject to the applicable restrictions, the grantee has the rights of a
Shareholder with respect to the restricted stock.
Dividend Equivalent Rights. In connection with any award, the Committee
may, in its discretion, grant a dividend equivalent right entitling the grantee
to receive amounts equal to the ordinary dividends that would be
- 9 -
<PAGE>
paid, during the time such award is outstanding and unexercised, on the shares
of Common Stock covered by such award if such shares were then outstanding. The
Committee shall determine whether such payments are made in cash and/or in
shares of Common Stock or in another form, whether they shall be conditioned
upon the exercise of the award to which they relate, the time at which they will
be made, and such other terms and conditions as it deems appropriate.
Restricted Stock Units. The Committee may grant awards of restricted
stock units to such key persons, in such amounts, and subject to such terms and
conditions as the Committee shall determine in its discretion. At the time of
grant, the Committee shall specify the date or dates on which the restricted
stock units shall become fully vested and nonforfeitable, and may specify such
conditions to vesting as it deems appropriate. The Committee at any time may
accelerate vesting dates and otherwise waive or amend any conditions of an award
of restricted stock units. At the time of grant, the Committee shall specify the
maturity date applicable to each grant of restricted stock units, which may be
determined at the election of the grantee. On the maturity date, the Company
shall transfer to the grantee one unrestricted, fully transferable share of
Common Stock for each restricted stock unit scheduled to be paid out on such
date and not previously forfeited. The Committee shall specify the purchase
price, if any, to be paid by the grantee to the Company for such shares of
Common Stock.
Other Stock-Based Awards. The Board may authorize other types of
stock-based awards (including the grant of unrestricted shares), which the
Committee may grant to such key persons, and in such amounts and subject to such
terms and conditions, as the Committee shall in its discretion determine.
TERMINATION OF EMPLOYMENT OR SERVICE
Options and SARs. Unless the Board of Directors otherwise specifies:
(i) all options and SARs not yet exercised shall terminate upon termination of
the grantee's employment or service by reason of discharge for cause; (ii) if a
grantee's employment or service terminates for reasons other than cause,
disability or death, the grantee's options and/or SARs generally will remain
exercisable for three months after termination to the extent that they were
exercisable at termination, but not after the scheduled expiration date of the
award; and (iii) if a grantee dies or becomes disabled while in the Company's
employ or service or during the aforementioned post-employment exercise period,
the grantee's options and/or SARs, to the extent exercisable immediately prior
to death or disability, generally will remain exercisable for one year after the
date of death or disability, but not after the scheduled expiration date of the
award.
Restricted Stock. If a grantee's employment or service terminates for
any reason, during the 90 days following termination the Company will have the
right to require forfeiture of restricted shares in exchange for any amount paid
by the grantee for such shares.
Restricted Stock Units. In the event of the termination of a grantee's
employment or service for any reason, restricted stock units that have not
become nonforfeitable shall be forfeited and cancelled.
Right of Recapture. If at any time within one year after the date on
which a participant exercises an option or SAR, or on which restricted stock
vests, or which is the maturity date of restricted stock units, or on which
income is realized by a participant in connection with any other stock-based
award (each of which events is a "Realization Event"), the participant (a) is
terminated for cause or (b) engages in any activity determined in the discretion
of the Committee to be in competition with any activity of the Company, or
otherwise inimical, contrary or harmful to the interests of the Company
(including, but not limited to, accepting employment with or serving as a
consultant, adviser or in any other capacity to an entity that is in competition
with or acting against the interests of the Company), then any gain realized by
the participant from the Realization Event shall be paid by the participant to
the Company upon notice from the Company. Such gain shall be determined as of
the date of the Realization Event, without regard to any subsequent change in
the fair market value of a share of
- 10 -
<PAGE>
Common Stock. The Company shall have the right to offset such gain against any
amounts otherwise owed to the participant by the Company (whether as wages,
vacation pay, or pursuant to any benefit plan or other compensatory
arrangement).
OTHER FEATURES OF THE STOCK INCENTIVE PLAN
Unless sooner terminated by the Board of Directors, the provisions of
the 1997 Plan respecting the grant of ISOs shall terminate on the day before the
tenth anniversary of the adoption of the 1997 Plan by the Board of Directors and
no ISO awards shall thereafter be made under the 1997 Plan. All awards made
under the 1997 Plan prior to its termination shall remain in effect until they
are satisfied or terminated.
In the event of a change of control (as defined in the 1997 Plan), (i)
any option or SAR then outstanding whose date of grant was at least one year
prior to the date of the change of control shall become fully vested and
immediately exercisable upon the subsequent termination of employment of the
grantee by the Company or its successors without cause and (ii) the Committee
may amend any award in such manner as it deems appropriate, including without
limitation by amendments that advance the dates upon which outstanding awards
shall terminate.
FEDERAL INCOME TAX CONSEQUENCES
The description of Federal tax consequences set forth below is
necessarily general in nature and does not purport to be complete.
There are generally no Federal tax consequences either to the optionee
or to the Company upon the grant of an option. On exercise of an ISO, the
optionee will not recognize any income, and the Company will not be entitled to
a deduction for tax purposes, although such exercise may give rise to liability
for the optionee under the alternative minimum tax provisions of the Code.
However, if the optionee disposes of shares acquired upon exercise of an ISO
within two years of the date of grant or one year of the date of exercise, the
optionee will recognize compensation income, and the Company will be entitled to
a deduction for tax purposes in the same amount, equal to the excess of the fair
market value of the shares of Common Stock on the date of exercise over the
option exercise price (or the gain on sale, if less); the remainder of any gain
to the optionee will be treated as capital gain. Otherwise, the Company will not
be entitled to any deduction for tax purposes upon disposition of such shares,
and the entire gain for the optionee will be treated as a capital gain. On
exercise of a non-qualified stock option, the amount by which the fair market
value of the Common Stock on the date of exercise exceeds the option exercise
price will generally be taxable to the optionee as compensation income, and will
generally be deductible for tax purposes by the Company. The disposition of
shares of Common Stock acquired upon exercise of a non-qualified stock option
will generally result in a capital gain or loss for the optionee, but will have
no tax consequences for the Company.
The grant of an SAR, a dividend equivalent right, restricted stock or
performance share award generally will not result in income for the grantee or
in a tax deduction for the Company. Upon the settlement of such a right or
award, and upon the vesting of restricted stock, the grantee will recognize
ordinary income equal to the fair market value of any shares of Common Stock
and/or any cash received, and the Company will be entitled to a tax deduction in
the same amount. An award of restricted shares of Common Stock will not result
in income for the grantee or in a tax deduction for the Company until such time
as the shares are no longer subject to forfeiture unless the grantee elects
otherwise. At that time, the grantee generally will recognize ordinary income
equal to the fair market value of the shares less any amount paid for them, and
the Company will be entitled to a tax deduction in the same amount. Dividends
paid on forfeitable restricted shares are treated as compensation for Federal
tax purposes. A grant of unrestricted shares of Common Stock will result in
income for the grantee, and a tax deduction for the Company, generally equal to
the fair market value of such shares less any amount paid for them.
- 11 -
<PAGE>
Limitations on the Company's Compensation Deduction. Section 162(m) of
the Code limits the deduction which the Company may take for otherwise
deductible compensation payable to certain executive officers to the extent that
compensation paid to such officers for a year exceeds $1 million, unless such
compensation meets certain criteria. Although the Company believes that
compensation realized from stock options and SARs granted under the 1997 Plan
generally will satisfy the requirements to be considered performance-based for
purposes of Section 162(m) of the Code, there is no assurance such awards will
satisfy such requirements. In addition, because other awards under the 1997 Plan
will generally not meet the requirements of Section 162(m) of the Code, the
deduction attributable to any compensation realized under any such awards to the
affected executive officers may be limited under Section 162(m) of the Code.
Tax Withholding. The Committee may require payments from participants
in the 1997 Plan, or withhold from payments due to be made thereunder, in order
to satisfy applicable withholding tax requirements.
THE INDEPENDENT DIRECTOR OPTIONS
The purpose of the Independent Director Options is to retain qualified
persons as non-employee directors of the Company so as to maintain and enhance
the Company's long-term performance. The Independent Director Options, which
could not be granted under the 1993 Plan since at the time of grant the grantee
was not an employee of the Company, are fully vested, subject to the approval of
the Shareholders at the Annual Meeting. Jatinder Wadhwa has been granted
Independent Director Options to purchase an aggregate of 40,000 shares of Common
Stock. The Independent Director Options provide for an exercise price of $1.00
per share of Common Stock. On October 8, 1997, the closing price of the Common
Stock on the OTC Bulletin Board was $2.75 per share.
- 12 -
<PAGE>
PROPOSAL 3: TO RATIFY APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors has appointed the firm of Albrecht, Viggiano,
Zureck & Company, P.C. as the Company's independent public auditors for the
fiscal year ending March 31, 1998. The Shareholders will be asked to ratify the
appointment of Albrecht, Viggiano, Zureck & Company, P.C. as the independent
public auditors of the Company for the fiscal year ending March 31, 1998.
Ratification of the appointment requires the affirmative vote of a majority of
the votes cast at the Annual Meeting by the holders of shares entitled to vote
thereon. Representatives of Albrecht, Viggiano, Zureck & Company, P.C. are
expected to be present at the Annual Meeting, with an opportunity to make a
statement if they desire to do so, and they are expected to be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C. AS THE COMPANY'S
INDEPENDENT PUBLIC AUDITORS.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be considered as of the next Annual
Meeting of Shareholders must be received by the Company, addressed to the
attention of the Company's Secretary, at its offices at 400 Oser Avenue, Suite
1650, Hauppauge, New York, 11788, no later than June 12, 1998, in order to be
included in the Company's proxy statement relating to that meeting.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matter that is to be presented to the Shareholders for formal
action at the Annual Meeting. If, however, any other matter properly comes
before the meeting or any adjournment(s) or postponement(s) thereof, it is the
intention of the persons named in the enclosed form of proxy to vote such
proxies in accordance with their best judgment on such matters.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING. THE BOARD URGES YOU TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID
REPLY ENVELOPE. YOUR COOPERATION AS A SHAREHOLDER, REGARDLESS OF THE NUMBER OF
SHARES OF STOCK YOU OWN, WILL REDUCE THE EXPENSES INCIDENT TO A FOLLOW-UP
SOLICITATION OF PROXIES.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE
THE COMPANY AT (516) 231-1200.
By Order of the Board of Directors
/s/ J.C. Chatpar
----------------
J.C. Chatpar
Chairman of the Board, President and
Chief Executive Officer
Hauppauge, New York
Dated: October 10, 1997
- 13 -
<PAGE>
EXHIBIT A
CYBER DIGITAL, INC.
1997 STOCK INCENTIVE PLAN
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
ARTICLE I
GENERAL
<S> <C> <C>
1.1 Purpose................................................................................................. 1
1.2 Administration.......................................................................................... 1
1.3 Persons Eligible for Awards............................................................................. 1
1.4 Types of Awards Under Plan.............................................................................. 2
1.5 Shares Available for Awards............................................................................. 2
1.6 Definitions of Certain Terms............................................................................ 2
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards............................................................................ 3
2.2 No Rights as a Shareholder.............................................................................. 4
2.3 Grant of Stock Options, Stock Appreciation Rights and Dividend Equivalent Rights........................ 4
2.4 Exercise of Options and Stock Appreciation Rights....................................................... 5
2.5 Termination of Employment; Death........................................................................ 6
2.6 Grant of Restricted Stock............................................................................... 6
2.7 Grant of Restricted Stock Units......................................................................... 7
2.8 Other Stock-Based Awards................................................................................ 7
2.9 Grant of Dividend Equivalent Rights..................................................................... 7
2.10 Right of Recapture...................................................................................... 8
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification
of Awards............................................................................................. 8
3.2 Tax Withholding......................................................................................... 8
3.3 Restrictions............................................................................................ 9
3.4 Nonassignability........................................................................................ 9
3.5 Requirement of Notification of Election Under Section 83(b) of the Code................................. 9
3.6 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code............. 9
3.7 Change in Control....................................................................................... 9
3.8 Right of Discharge Reserved............................................................................. 10
3.9 Nature of Payments...................................................................................... 10
3.10 Non-Uniform Determinations.............................................................................. 10
3.11 Other Payments or Awards................................................................................ 10
3.12 Section Headings........................................................................................ 10
3.13 Effective Date and Term of Plan......................................................................... 11
3.14 Governing Law........................................................................................... 11
</TABLE>
-i-
<PAGE>
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Cyber Digital, Inc. 1997 Stock Incentive Plan (the
"Plan") is to provide for officers, other employees and directors of, and
consultants to, Cyber Digital, Inc. (the "Company") and its subsidiaries an
incentive (a) to enter into and remain in the service of the Company, (b) to
enhance the long-term performance of the Company, and (c) to acquire a
proprietary interest in the success of the Company.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the
Stock Option Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to persons subject to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a "non-employee director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of "non-employee directors". To
the extent required for compensation realized from awards under the Plan to be
deductible by the Company pursuant to section 162(m) of the Internal Revenue
Code of 1986 (the "Code"), the members of the Committee shall be "outside
directors" within the meaning of section 162(m).
1.2.2 The Committee shall have the authority (a) to exercise all of the
powers granted to it under the Plan, (b) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a majority
of its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to the
Plan or any Plan Agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein: (a)
until the Board shall appoint the members of the Committee, the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time, grant awards or resolve to administer the Plan. In
either of the foregoing events, the Board shall have all of the authority and
responsibility granted to the Committee herein.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such directors, officers and other
employees of the Company and its subsidiaries (including prospective employees
conditioned on their becoming employees), and to such consultants to the Company
and its subsidiaries (collectively, "key persons") as the Committee shall in its
discretion select.
-1-
<PAGE>
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options (within the meaning of section 422 of the Code), (b) nonqualified stock
options, (c) stock appreciation rights, (d) dividend equivalent rights, (e)
restricted stock, (f) restricted stock units and (g) other stock-based awards,
all as more fully set forth in Article II. The term "award" means any of the
foregoing. No incentive stock option may be granted to a person who is not an
employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the Company, par
value $.01 per share ("Common Stock"), which may be transferred pursuant to
awards granted under the Plan shall not exceed 850,999 shares. Such shares may
be authorized but unissued Common Stock or authorized and issued Common Stock
held in the Company's treasury or acquired by the Company for the purposes of
the Plan. The Committee may direct that any stock certificate evidencing shares
issued pursuant to the Plan shall bear a legend setting forth such restrictions
on transferability as may apply to such shares pursuant to the Plan.
1.5.2 The total number of shares of Common Stock with respect to which
stock options and stock appreciation rights may be granted to any one employee
of the Company or a subsidiary during any one-year period shall not exceed
500,000.
1.5.3 Subject to any required action by the shareholders of the
Company, the number of shares of Common Stock covered by each outstanding award,
the number of shares available for awards, the number of shares that may be
subject to awards to any one employee, and the price per share of Common Stock
covered by each such outstanding award shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an award.
After any adjustment made pursuant to this Section 1.5.3, the number of shares
subject to each outstanding award shall be rounded to the nearest whole number.
1.5.4 Except as provided in this Section 1.5 and in Section 2.3.8,
there shall be no limit on the number or the value of the shares of Common Stock
that may be subject to awards to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Common Stock on any day
shall be determined as follows.
(a) If the principal market for the Common Stock (the "Market")
is a national securities exchange or the Nasdaq National Market, the last sale
price or, if no reported sales take place on the applicable date, the average of
the high bid and low asked price of Common Stock as reported for such Market on
such date or, if no such quotation is made on such date, on the next preceding
day on which there were quotations, provided that such quotations shall have
been made within the ten (10) business days preceding the applicable date;
(b) If the Market is the Nasdaq SmallCap Market, the OTC Bulletin
Board or another market, the average of the high bid and low asked price for
Common Stock on the applicable date, or, if no such quotations shall have been
made on such date, on the next preceding day on which there were quota-
-2-
<PAGE>
tions, provided that such quotations shall have been made within the ten (10)
business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b) shall apply,
the Fair Market Value of a share of Common Stock on any day shall be determined
in good faith by the Committee.
1.6.2 The term "incentive stock option" means an option that is
intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Code, as now constituted or subsequently amended, or
pursuant to a successor provision of the Code, and which is so designated in the
applicable Plan Agreement. Any option that is not specifically designated as an
incentive stock option shall under no circumstances be considered an incentive
stock option. Any option that is not an incentive stock option is referred to
herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an award
under the Plan who is not an employee of the Company, the grantee's association
with the Company or a subsidiary as a director, consultant or otherwise.
1.6.4 A grantee shall be deemed to have a "termination of employment"
upon ceasing to be employed by the Company and all of its subsidiaries or by a
corporation assuming awards in a transaction to which section 425(a) of the Code
applies. The Committee may in its discretion determine (a) whether any leave of
absence constitutes a termination of employment for purposes of the Plan, (b)
the impact, if any, of any such leave of absence on awards theretofore made
under the Plan, and (c) when a change in a non-employee's association with the
Company constitutes a termination of employment for purposes of the Plan. The
Committee shall have the right to determine whether the termination of a
grantee's employment is a dismissal for cause and the date of termination in
such case, which date the Committee may retroactively deem to be the date of the
action that is cause for dismissal. Such determinations of the Committee shall
be final, binding and conclusive.
1.6.5 The term "cause," when used in connection with termination of a
grantee's employment, shall have the meaning set forth in any then-effective
employment agreement between the grantee and the Company or a subsidiary
thereof. In the absence of such an employment agreement, "cause" means: (a)
conviction of any crime (whether or not involving the Company) constituting a
felony in the jurisdiction involved; (b) engaging in any substantiated act
involving moral turpitude; (c) engaging in any act which, in each case,
subjects, or if generally known would subject, the Company to public ridicule or
embarrassment; (d) material violation of the Company's policies, including,
without limitation, those relating to sexual harassment or the disclosure or
misuse of confidential information; or (e) serious neglect or misconduct in the
performance of the grantee's duties for the Company or a subsidiary or willful
or repeated failure or refusal to perform such duties; in each case as
determined by the Committee, which determination shall be final, binding and
conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of unrestricted
stock) shall be evidenced by a written agreement ("Plan Agreement") which shall
contain such provisions as the Committee in its discretion deems necessary or
desirable. Such provisions may include, without limitation, a requirement that
the grantee become a party to a shareholders' agreement with respect to any
shares of Common Stock acquired pursuant to the award, a requirement that the
grantee acknowledge that such shares are acquired for investment purposes only,
and a right of first refusal exercisable by the Company in the event that the
grantee wishes to transfer any such shares. By accepting an award pursuant to
the Plan, a grantee thereby agrees that the award shall be subject to all of the
terms and provisions of the Plan and the applicable Plan Agreement.
-3-
<PAGE>
2.2 No Rights as a Shareholder
No grantee of an option or stock appreciation right (or other person
having the right to exercise such award) shall have any of the rights of a
shareholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such shares. Except as
otherwise provided in Section 1.5.3, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
2.3 Grant of Stock Options, Stock Appreciation Rights and Dividend
Equivalent Rights
2.3.1 The Committee may grant incentive stock options and nonqualified
stock options (collectively, "options") to purchase shares of Common Stock from
the Company, to such key persons, in such amounts and subject to such terms and
conditions, as the Committee shall determine in its discretion, subject to the
provisions of the Plan.
2.3.2 The Committee may grant stock appreciation rights to such key
persons, in such amounts and subject to such terms and conditions, as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection with an incentive stock option may be granted only at the
time of grant of such option.
2.3.3 The grantee of a stock appreciation right shall have the right,
subject to the terms of the Plan and the applicable Plan Agreement, to receive
from the Company an amount equal to (a) the excess of the Fair Market Value of a
share of Common Stock on the date of exercise of the stock appreciation right
over (b) the exercise price of such right as set forth in the Plan Agreement (or
over the option exercise price if the stock appreciation right is granted in
connection with an option), multiplied by (c) the number of shares with respect
to which the stock appreciation right is exercised. Payment upon exercise of a
stock appreciation right shall be in cash or in shares of Common Stock (valued
at their Fair Market Value on the date of exercise of the stock appreciation
right) or both, all as the Committee shall determine in its discretion. Upon the
exercise of a stock appreciation right granted in connection with an option, the
number of shares subject to the option shall be correspondingly reduced by the
number of shares with respect to which the stock appreciation right is
exercised. Upon the exercise of an option in connection with which a stock
appreciation right has been granted, the number of shares subject to the stock
appreciation right shall be correspondingly reduced by the number of shares with
respect to which the option is exercised.
2.3.4 Each Plan Agreement with respect to an option shall set forth the
amount (the "option exercise price") payable by the grantee to the Company upon
exercise of the option evidenced thereby. The option exercise price per share
shall be determined by the Committee in its discretion; provided, however, that
the option exercise price of an incentive stock option shall be at least 100% of
the Fair Market Value of a share of Common Stock on the date the option is
granted, and provided further that in no event shall the option exercise price
be less than the par value of a share of Common Stock.
2.3.5 Each Plan Agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined by the Committee in its discretion; provided, however, that no
incentive stock option (or a stock appreciation right granted in connection with
an incentive stock option) shall be exercisable more than 10 years after the
date of grant.
2.3.6 The Committee may in its discretion include in any Plan Agreement
with respect to an option (the "original option") a provision that an additional
option (the "additional option") shall be granted to any grantee who, pursuant
to Section 2.4.3(b), delivers shares of Common Stock in partial or full payment
of the exercise price of the original option. The additional option shall be for
a number of shares of Common Stock equal to the number thus delivered, shall
have an exercise price equal to the Fair Market Value of a share of
-4-
<PAGE>
Common Stock on the date of exercise of the original option, and shall have an
expiration date no later than the expiration date of the original option. In the
event that a Plan Agreement provides for the grant of an additional option, such
Agreement shall also provide that the exercise price of the original option be
no less than the Fair Market Value of a share of Common Stock on its date of
grant, and that any shares that are delivered pursuant to Section 2.4.3(b) in
payment of such exercise price shall have been held for at least six months.
2.3.7 To the extent that the aggregate Fair Market Value (determined as
of the time the option is granted) of the stock with respect to which incentive
stock options granted under this Plan and all other plans of the Company and any
subsidiary are first exercisable by any employee during any calendar year shall
exceed the maximum limit (currently, $100,000), if any, imposed from time to
time under section 422 of the Code, such options shall be treated as
nonqualified stock options.
2.3.8 Notwithstanding the provisions of Sections 2.3.4 and 2.3.5, to
the extent required under section 422 of the Code, an incentive stock option may
not be granted under the Plan to an individual who, at the time the option is
granted, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of his employer corporation or of its parent or
subsidiary corporations (as such ownership may be determined for purposes of
section 422(b)(6) of the Code) unless (a) at the time such incentive stock
option is granted the option exercise price is at least 110% of the Fair Market
Value of the shares subject thereto and (b) the incentive stock option by its
terms is not exercisable after the expiration of 5 years from the date it is
granted.
2.4 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or stock
appreciation right granted under the Plan shall be exercisable as follows:
2.4.1 Unless the applicable Plan Agreement otherwise provides, an
option or stock appreciation right shall become exercisable in four
substantially equal installments, on each of the first, second, third and fourth
anniversaries of the date of grant, and each installment, once it becomes
exercisable, shall remain exercisable until expiration, cancellation or
termination of the award.
2.4.2 Unless the applicable Plan Agreement otherwise provides, an
option or stock appreciation right may be exercised from time to time as to all
or part of the shares as to which such award is then exercisable (but, in any
event, only for whole shares). A stock appreciation right granted in connection
with an option may be exercised at any time when, and to the same extent that,
the related option may be exercised. An option or stock appreciation right shall
be exercised by the filing of a written notice with the Company, on such form
and in such manner as the Committee shall prescribe.
2.4.3 Any written notice of exercise of an option shall be accompanied
by payment for the shares being purchased. Such payment shall be made: (a) by
certified or official bank check (or the equivalent thereof acceptable to the
Company) for the full option exercise price; or (b) unless the applicable Plan
Agreement provides otherwise, by delivery of shares of Common Stock acquired at
least six months prior to the option exercise date and having a Fair Market
Value (determined as of the exercise date) equal to all or part of the option
exercise price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent permitted by
law, by such other provision as the Committee may from time to time prescribe.
2.4.4 Promptly after receiving payment of the full option exercise
price, or after receiving notice of the exercise of a stock appreciation right
for which payment will be made partly or entirely in shares, the Company shall,
subject to the provisions of Section 3.3 (relating to certain restrictions),
deliver to the grantee or to such other person as may then have the right to
exercise the award, a certificate or certificates for the shares of Common Stock
for which the award has been exercised. If the method of payment employed upon
option exercise so requires, and if applicable law permits, an optionee may
direct the Company to deliver the certificate(s) to the optionee's stockbroker.
-5-
<PAGE>
2.5 Termination of Employment; Death
2.5.1 Except to the extent otherwise provided in Section 2.5.2 or 2.5.3
or in the applicable Plan Agreement, all options and stock appreciation rights
not theretofore exercised shall terminate upon termination of the grantee's
employment for any reason (including death).
2.5.2 If a grantee's employment terminates for any reason other than
death or dismissal for cause, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the award
on the date of employment termination; and (b) exercise must occur within three
months after employment terminates, except that the three-month period shall be
increased to one year if the termination is by reason of disability, but in no
event after the expiration date of the award as set forth in the Plan Agreement.
In the case of an incentive stock option, the term "disability" for purposes of
the preceding sentence shall have the meaning given to it by section 422(c)(7)
of the Code.
2.5.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.5.2, any outstanding
option or stock appreciation right shall be exercisable on the following terms
and conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of death; and (b) exercise must occur
by the earlier of the first anniversary of the grantee's death or the expiration
date of the award. Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient shall be bound by all the terms and
conditions of the Plan and the applicable Plan Agreement which would have
applied to the grantee including, without limitation, the provisions of Sections
3.3 and 3.7 hereof.
2.6 Grant of Restricted Stock
2.6.1 The Committee may grant restricted shares of Common Stock to such
key persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Restricted stock awards may be made independently of or in connection with
any other award under the Plan. A grantee of a restricted stock award shall have
no rights with respect to such award unless such grantee accepts the award
within such period as the Committee shall specify by executing a Plan Agreement
in such form as the Committee shall determine and, if the Committee shall so
require, makes payment to the Company by certified or official bank check (or
the equivalent thereof acceptable to the Company) in such amount as the
Committee may determine.
2.6.2 Promptly after a grantee accepts a restricted stock award, the
Company shall issue in the grantee's name a certificate or certificates for the
shares of Common Stock covered by the award. Upon the issuance of such
certificate(s), the grantee shall have the rights of a shareholder with respect
to the restricted stock, subject to the nontransferability restrictions and
Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such
other restrictions and conditions as the Committee in its discretion may include
in the applicable Plan Agreement.
2.6.3 Unless the Committee shall otherwise determine, any certificate
issued evidencing shares of restricted stock shall remain in the possession of
the Company until such shares are free of any restrictions specified in the
applicable Plan Agreement.
2.6.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable Plan Agreement. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other conditions)
on which the nontransferability of the restricted stock shall lapse. Unless the
applicable Plan Agreement provides otherwise, additional shares of Common Stock
or other
-6-
<PAGE>
property distributed to the grantee in respect of shares of restricted stock, as
dividends or otherwise, shall be subject to the same restrictions applicable to
such restricted stock.
2.6.5 During the 90 days following termination of the grantee's
employment for any reason, the Company shall have the right to require the
return of any shares to which restrictions on transferability apply, in exchange
for which the Company shall repay to the grantee (or the grantee's estate) any
amount paid by the grantee for such shares.
2.7 Grant of Restricted Stock Units
2.7.1 The Committee may grant awards of restricted stock units to such
key persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Restricted stock units may be awarded independently of or in connection
with any other award under the Plan.
2.7.2 At the time of grant, the Committee shall specify the date or
dates on which the restricted stock units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. In the event of the termination of the grantee's employment by the
Company and its subsidiaries for any reason, restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled. The Committee at any
time may accelerate vesting dates and otherwise waive or amend any conditions of
an award of restricted stock units.
2.7.3 At the time of grant, the Committee shall specify the maturity
date applicable to each grant of restricted stock units, which may be determined
at the election of the grantee. Such date may be later than the vesting date or
dates of the award. On the maturity date, the Company shall transfer to the
grantee one unrestricted, fully transferable share of Common Stock for each
restricted stock unit scheduled to be paid out on such date and not previously
forfeited. The Committee shall specify the purchase price, if any, to be paid by
the grantee to the Company for such shares of Common Stock.
2.8 Other Stock-Based Awards
The Board may authorize other types of stock-based awards (including
the grant of unrestricted shares), which the Committee may grant to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee shall in its discretion determine, subject to the provisions of the
Plan. Such awards may entail the transfer of actual shares of Common Stock to
Plan participants, or payment in cash or otherwise of amounts based on the value
of shares of Common Stock.
2.9 Grant of Dividend Equivalent Rights
The Committee may in its discretion include in the Plan Agreement with
respect to any award a dividend equivalent right entitling the grantee to
receive amounts equal to the ordinary dividends that would be paid, during the
time such award is outstanding and unexercised, on the shares of Common Stock
covered by such award if such shares were then outstanding. In the event such a
provision is included in a Plan Agreement, the Committee shall determine whether
such payments shall be made in cash, in shares of Common Stock or in another
form, whether they shall be conditioned upon the exercise of the award to which
they relate, the time or times at which they shall be made, and such other terms
and conditions as the Committee shall deem appropriate.
-7-
<PAGE>
2.10 Right of Recapture
If at any time within one year after the date on which a participant
exercises an option or stock appreciation right, or on which restricted stock
vests, or which is the maturity date of restricted stock units, or on which
income is realized by a participant in connection with any other stock-based
award (each of which events is a "Realization Event"), the participant (a) is
terminated for cause or (b) engages in any activity determined in the discretion
of the Committee to be in competition with any activity of the Company, or
otherwise inimical, contrary or harmful to the interests of the Company
(including, but not limited to, accepting employment with or serving as a
consultant, adviser or in any other capacity to an entity that is in competition
with or acting against the interests of the Company), then any gain ("Gain")
realized by the participant from the Realization Event shall be paid by the
participant to the Company upon notice from the Company. Such Gain shall be
determined as of the date of the Realization Event, without regard to any
subsequent change in the Fair Market Value of a share of Common Stock. The
Company shall have the right to offset such Gain against any amounts otherwise
owed to the participant by the Company (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue, revise or
amend the Plan in any respect whatsoever, except that no such amendment shall
materially impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the grantee (or,
after the grantee's death, the person having the right to exercise the award).
For purposes of this Section 3.1, any action of the Board or the Committee that
alters or affects the tax treatment of any award shall not be considered to
materially impair any rights of any grantee.
3.1.2 Shareholder approval of any amendment shall be obtained to the
extent necessary to comply with section 422 of the Code (relating to incentive
stock options) or other applicable law or regulation.
3.1.3 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would accelerate the time or
times at which the award becomes unrestricted or may be exercised, or waive or
amend any goals, restrictions or conditions set forth in the Agreement. However,
any such amendment (other than an amendment pursuant to Section 3.7.2, relating
to change in control) that materially impairs the rights or materially increases
the obligations of a grantee under an outstanding award shall be made only with
the consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
3.2 Tax Withholding
3.2.1 As a condition to the receipt of any shares of Common Stock
pursuant to any award or the lifting of restrictions on any award, or in
connection with any other event that gives rise to a federal or other
governmental tax withholding obligation on the part of the Company relating to
an award (including, without limitation, FICA tax), the Company shall be
entitled to require that the grantee remit to the Company an amount sufficient
in the opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation is a
transfer of shares of Common Stock, then, unless otherwise specified in the
applicable Plan Agreement, the grantee may satisfy the withholding obligation
imposed under Section 3.2.1 by electing to have the Company withhold shares of
Common Stock having a Fair Market Value equal to the amount of tax to be
withheld. For this purpose, Fair Market Value shall be determined as of the date
on which the amount of tax to be withheld is determined (and any fractional
share amount shall be settled in cash).
-8-
<PAGE>
3.3 Restrictions
3.3.1 If the Committee shall at any time determine that any consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "plan action"),
then such plan action shall not be taken, in whole or in part, unless and until
such consent shall have been effected or obtained to the full satisfaction of
the Committee.
3.3.2 The term "consent" as used herein with respect to any plan action
means (a) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (b) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made and (c) any and all consents, clearances and approvals in
respect of a plan action by any governmental or other regulatory bodies.
3.4 Nonassignability
Except to the extent otherwise provided in the applicable Plan
Agreement, no award or right granted to any person under the Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all such awards and rights shall be exercisable during the
life of the grantee only by the grantee or the grantee's legal representative.
3.5 Requirement of Notification of Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (that is, an election to include in gross income in the year of
transfer the amounts specified in section 83(b)), such grantee shall notify the
Company of such election within 10 days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code section
83(b).
3.6 Requirement of Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code
If any grantee shall make any disposition of shares of Common Stock
issued pursuant to the exercise of an incentive stock option under the
circumstances described in section 421(b) of the Code (relating to certain
disqualifying dispositions), such grantee shall notify the Company of such
disposition within 10 days thereof.
3.7 Change in Control
3.7.1 For purposes of this Section 3.7, a "Change In Control" shall be
deemed to have occurred upon the happening of any of the following events:
(a) any "person," including a "group," as such terms are defined
in Sections 13(d) and 14(d) of the 1934 Act and the rules promulgated
thereunder, becomes the beneficial owner, directly or indirectly, whether by
purchase or acquisition or agreement to act in concert or otherwise, of 10% or
more of the outstanding shares of Common Stock of the Company;
(b) a cash tender or exchange offer for 10% or more of the
outstanding shares of Common Stock of the Company is commenced;
(c) the shareholders of the Company approve an agreement to
merge, consolidate, liquidate, or sell all or substantially all of the assets of
the Company; or
-9-
<PAGE>
(d) two or more directors are elected to the Board without having
previously been nominated and approved by the members of the Board incumbent on
the day immediately preceding such election.
3.7.2 Upon the happening of a change in control:
(a) notwithstanding any other provision of this Plan, any option
or stock appreciation right then outstanding whose date of grant was at least
one year prior to the date of the Change in Control shall become fully vested
and immediately exercisable upon the subsequent termination of employment of the
grantee by the Company or its successors without cause unless the applicable
Plan Agreement expressly provides otherwise;
(b) to the fullest extent permitted by law, the Committee may, in
its sole discre- tion, amend any Plan Agreement in such manner as it deems
appropriate, including, without limitation, by amendments that advance the dates
upon which any or all outstanding awards of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action referred
to in Section 3.7.2(b) may be made conditional upon the consummation of the
applicable Change in Control transaction.
3.8 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon any
grantee the right to continue in the employ of the Company or affect any right
which the Company may have to terminate such employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of Common
Stock under the Plan shall be in consideration of services performed for the
Company by the grantee.
3.9.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or under any agreement
between the Company and the grantee, unless such plan or agreement specifically
provides otherwise.
3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan agreements, as
to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment of leaves of absence
pursuant to Section 1.6.4.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.12 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
-10-
<PAGE>
3.13 Effective Date and Term of Plan
3.13.1 The Plan was adopted by the Board on August 4, 1997, subject to
approval by the Company's shareholders. All awards under the Plan prior to such
shareholder approval are subject in their entirety to such approval. If such
approval is not obtained prior to the first anniversary of the date of adoption
of the Plan, the Plan and all awards thereunder shall terminate on that date.
3.13.2 Unless sooner terminated by the Board, the provisions of the
Plan respecting the grant of incentive stock options shall terminate on the day
before the tenth anniversary of the adoption of the Plan by the Board, and no
incentive stock option awards shall thereafter be made under the Plan. All
awards made under the Plan prior to its termination shall remain in effect until
such awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Plan Agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
-11-
<PAGE>
CYBER DIGITAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints J.C. Chatpar with full power of
substitution, to vote all shares of CYBER DIGITAL, INC. (the "Company"), which
the undersigned is entitled to vote at the Company's Annual Meeting to be held
at the Holiday Inn, 3845 Veterans Memorial Highway, Ronkonkoma, New York, on the
7th day of November, 1997, at 10:00 a.m. Eastern Standard Time, and at any
adjournment(s) or postponement(s) thereof, hereby ratifying all that said proxy
or his substitute may do by virtue hereof, and the undersigned authorizes and
instructs said proxy to vote as follows:
1. ELECTION OF DIRECTORS: To elect the nominees listed below for Director
for a term of one year;
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to to vote for all
the contrary below) [ ] nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Jawahar C. Chatpar, Jack P. Dorfman, Jatinder V. Wadhwa, Terry L. Jones
and Khushi A. Nichani.
2. APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN AND GRANTS OF STOCK
OPTIONS TO NON-EMPLOYEE DIRECTORS: To approve the adoption of the
Company's 1997 Stock Incentive Plan and the grants of options to a
non-employee director to purchase an aggregate of 40,000 shares of
Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL OF AUDITORS: To ratify and approve the appointment of
Albrecht, Viggiano, Zureck & Company, P.C. as independent public
auditors for the Company for the fiscal year ending March 31, 1998;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and in his discretion, upon any other matters that may properly come before the
meeting or any adjournments thereof.
(Continued and to be dated and signed on the other side.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED UNDER "ELECTION OF DIRECTORS" AND FOR PROPOSALS
2 AND 3.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
Dated: _____________________________, 1997
-------------------------------------------
(Signature of Shareholder)
-------------------------------------------
(Signature of Shareholder)
Your signature should appear the same as
your name appears herein. If signing as
attorney, executor, administrator, trustee
or guardian, please indicate the capacity in
which signing. When signing as joint
tenants, all parties to the joint tenancy
must sign. When the proxy is given by a
corporation, it should be signed by an
authorized officer.
