SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ELEXSYS, INTERNATIONAL
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(Name of Registrant as Specified in Its Charter)
ELEXSYS, INTERNATIONAL
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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ELEXSYS INTERNATIONAL, INC.
1188 BORDEAUX DRIVE
SUNNYVALE, CA 94089
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 30, 1996
TO THE STOCKHOLDERS OF ELEXSYS INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of ELEXSYS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), will be held on
Tuesday, January 30, 1996 at 2:00 p.m. local time at the Four Points Hotel, 100
North Mathilda Avenue, Sunnyvale, California 94089 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the adoption of the Company's 1996 Employee Stock Purchase
Plan.
3. To approve the adoption of the Company's 1995 Stock Option Plan, as
amended and restated.
4. To approve the adoption of the Company's 1996 Non-Employee Directors'
Stock Option Plan.
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on December 11, 1995,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Michael S. Shimada
Secretary
Sunnyvale, California
January 12, 1996
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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ELEXSYS INTERNATIONAL, INC.
1188 BORDEAUX DRIVE
SUNNYVALE, CALIFORNIA 94089
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JANUARY 30, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Elexsys International, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held on January 30, 1996, at
2:00 p.m. local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at the Four Points
Hotel, 100 North Mathilda Avenue, Sunnyvale, California 94089. The Company
intends to mail this proxy statement and accompanying proxy card on or about
January 12, 1996, to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on December
11, 1995 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on December 11, 1995 the Company had outstanding and entitled
to vote 9,023,930 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon. With respect to the
election of directors, stockholders may exercise cumulative voting rights. Under
cumulative voting, each holder of Common Stock will be entitled to three votes
for each share held. Each stockholder may give one candidate, who has been
nominated prior to voting, all the votes such stockholder is entitled to cast or
may distribute such votes among as many such candidates as such stockholder
chooses.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 1188
Bordeaux Drive, Sunnyvale, California 94089, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
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SHAREHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1997 Annual Meeting of Stockholders must be received by the Company not later
than September 13, 1996 in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
At the 1995 Annual Meeting of Stockholders, the stockholders approved a
proposal to adopt the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate"). Among other things, the Restated
Certificate eliminated the classification of the Company's Board of Directors in
favor of the annual election of directors. However, the Restated Certificate
provides that any incumbent director serving a term in excess of one year on
March 2, 1995, the effective date of the Restated Certificate, shall not be
required to stand for re-election until the expiration of such director's term.
Further, a director elected to fill a vacancy not resulting from an increase in
the number of directors shall have the same term as the remaining term of his
predecessor.
The Company's Bylaws presently authorize a Board of Directors composed of
five directors. Three directors will be elected at the Annual Meeting. Pursuant
to the Restated Certificate, the terms of two current directors expire at the
Annual Meeting. The Board currently has one vacancy. Each director to be elected
will hold office until the next annual meeting of stockholders and until his
successor is elected and has qualified, or until such director's earlier death,
resignation or removal. Each nominee listed below is currently a director of the
Company and was previously elected by the stockholders, except for Mr. Jeffries.
The terms of two directors, Messrs. Mandaric and Mendelson, do not expire at the
Annual Meeting.
Shares represented by executed proxies will be voted, if authority to do so
is not withhold, for the election of the three nominees named below, subject to
the discretionary power to cumulate votes. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for the individuals nominated and
for each person whose term of office as a director will continue after the
Annual Meeting.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
ROLAND G. MATTHEWS
Roland G. Matthews, age 56, has served as a director of the Company since
September 1980. He was Chairman of the Board of the Company from January 1990
until June 1994. Mr. Matthews was Chief Executive Officer of the Company from
September 1980 through March 1993 and was President of the Company from
September 1980 to February 1990 and from January 1992 through March 1993.
PETER S. JONAS
Peter S. Jonas, age 57, has served as a director of the Company since
September 1980 and Vice Chairman of the Board of Directors of the Company since
January 1990. He was a consultant to the Company from October 1994 to September
1995; President and Chief Executive Officer of the Company from February 1993
until October 1994; Secretary of the Company from September 1980 to October
1994; Executive Vice President of the Company from September 1980 to January
1990; and Chief Financial Officer of the Company from September 1980 to February
1993. Mr. Jonas is presently a private investor and business consultant to
private and public companies.
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C. BRADFORD JEFFRIES
C. Bradford Jeffries, age 64, has been a partner of Sigma Management since
1984. Sigma Management is the general partner of Sigma Partners I, II and III,
three venture capital funds. Mr. Jeffries is a vice president of Venture
Investment Management Company L.L.C., which he co-founded in 1993. Venture
Investment Management Company is the general partner of Venture Investment
Associates, a venture capital fund formed to acquire the venture investment
portfolio of American Express Co. Currently, Mr. Jeffries serves as a director
of four private companies. Prior to 1994, Mr. Jeffries was a partner of Cooley
Godward Castro Huddleson & Tatum, a private law firm and counsel to the Company,
to which he continues to be of counsel.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTOR CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING
MILAN MANDARIC
Milan Mandaric, age 57, has served as Chairman of the Board of Directors of
the Company since June 1994 and President and Chief Executive Officer of the
Company since October 1994. Mr. Mandaric was a director of Sanmina Corporation,
a high technology multilayer circuit board and backpanel manufacturer, from 1980
until February 1994 and President, Chief Executive Officer and Chairman of the
Board of Sanmina Corporation from 1980 until September 1989. Mr. Mandaric was
Chairman of the Board of Directors of Senses International, Inc., a manufacturer
of wireless security systems, from July 1989 to May 1995.
DIRECTOR CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
ALAN C. MENDELSON
Alan C. Mendelson, age 47, was elected a director of the Company in January
1996. He has been a partner of Cooley Godward Castro Huddleson & Tatum, a
private law firm and counsel to the Company, since 1980, and served as the
managing partner of its Palo Alto office from May 1990 through March 1995. Mr.
Mendelson also served as Secretary and Acting General Counsel of Amgen Inc., a
biopharmaceutical company, from April 1990 to March 1991 and is currently
serving as Acting General Counsel of Cadence Design Systems, Inc., an electronic
design automation software company. Mr. Mendelson is currently a director of
Acuson Corporation, CoCensys, Inc. and Isis Pharmaceuticals, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1995 the Board of Directors held
13 meetings. The Board has an Audit Committee and a Stock Option Committee.
The Audit Committee, whose current members are Messrs. Matthews and Jonas,
has the following principal powers, duties and functions: (i) to review
management's recommendations to the Board of Directors with respect to the
selection of a firm of independent public accountants to audit the consolidated
financial statements of the Company and its subsidiaries; (ii) to discuss with
such independent public accountants the scope, results and effectiveness of
their audit; (iii) to discuss with such independent public accountants and with
the management of the Company the Company's internal accounting and control
functions; and (iv) to report to the Board of Directors with respect to the
foregoing, at such times and in such manner as the Board of Directors shall
determine. The Audit Committee met two times during the fiscal year ended
September 30, 1995.
The Stock Option Committee makes stock option grants to employees and
consultants under the Company's stock option plans and performs such other
functions as the Board may delegate. The Stock Option Committee, whose current
members are Messrs. Matthews and Jonas, met four times during the fiscal year
ended September 30, 1995.
The Company does not have a compensation or nominating committee.
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PROPOSAL 2
APPROVAL OF THE ADOPTION OF THE
1996 EMPLOYEE STOCK PURCHASE PLAN
In January 1996, the Board of Directors adopted the 1996 Employee Stock
Purchase Plan (the "Purchase Plan") authorizing the issuance of 250,000 shares
of the Company's Common Stock. No shares had been issued under the Purchase Plan
to date. The Purchase Plan is intended to afford the Company flexibility in
providing employees with stock incentives and ensures that the Company can
continue to provide such incentives at levels determined appropriate by the
Board.
Stockholders are requested in this Proposal 2 to approve the adoption of the
Purchase Plan. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the adoption of the Purchase Plan. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Purchase Plan, as amended, are outlined below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees of
the Company (and any parent or subsidiary of the Company designated by the Board
of Directors to participate in the Purchase Plan) may be given an opportunity to
purchase Common Stock of the Company through payroll deductions, to assist the
Company in retaining the services of its employees, to secure and retain the
services of new employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company. All of the Company's
approximately 940 employees, who meet the eligibility requirements, are eligible
to participate in the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power, which it has not
exercised, to delegate administration of such plan to a committee of not less
than two Board members. The Board may abolish any such committee at any time and
revest in the Board the administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering is six
months in duration.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week an
five months per calendar year by the Company (or by any parent or subsidiary
of the Company designated from time to time by the Board on the first
day of an offering period is eligible to participate in that offering under the
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Purchase Plan, provided such employee has been in the continuous employ of the
Company for at least six months preceding the first day of the offering period.
Non-Employee Directors are not eligible to participate in the Purchase Plan.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering to
the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to 15% of such
employees' compensation, excluding bonuses, during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan is the lower of (a) 85% of the fair market value of a share of
Common Stock on the date of commencement of the offering, or (b) 85% of the fair
market value of a share of Common Stock on the last day of the purchase period.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during the purchase period, a participant may
reduce or terminate his or her payroll deductions. A participant may not
increase or begin such payroll deductions after the beginning of any purchase
period, except, if the Board provides, in the case of an employee who first
becomes eligible to participate as of a date specified during the purchase
period. All payroll deductions made for a participant are credited to his or her
account under the Purchase Plan and deposited with the general funds of the
Company. A participant may not make any additional payments into such account.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board may specify a maximum number of shares
any employee may be granted the right to purchase and a maximum aggregate number
of shares which may be purchased pursuant to such offering by all participants.
If the aggregate number of shares to be purchased upon exercise of rights
granted in the offering would exceed the maximum aggregate number, the Board
would make a pro rata allocation of shares available in a uniform and equitable
manner. Unless the employee's participation is discontinued, his right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of the applicable offering period.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase
of stock on the employee's behalf during such offering, and such employee's
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interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (b) modify the
requirements relating to eligibility for participation in the Purchase Plan or
(c) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan, if such approval is required in order to comply with the requirements of
Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Rights granted before amendment or termination of the Purchase Plan will not
be impaired by any amendment or termination of such plan without consent of the
person to whom such rights were granted, except as necessary to comply with
applicable laws or regulations.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of the
Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, or the exercise date of any ongoing
offering will be accelerated such that the outstanding rights may be exercised
immediately prior to, or concurrent with, any such event.
STOCK SUBJECT TO PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares as
if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchased shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering
period) will be treated as ordinary income. Any further gain or any loss will be
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taxed as a long-term capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income. The maximum capital gains rate
for federal income tax purposes is 28% while the maximum ordinary rate is
effectively 39.6% at the present time.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be long or short-term
depending on whether the stock has been held for more than one year.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation).
PROPOSAL 3
APPROVAL OF ADOPTION OF THE 1995 STOCK OPTION PLAN,
AS AMENDED AND RESTATED
In July 1995, the Board of Directors adopted the Company's 1995 Stock Option
Plan (the "1995 Plan").
At December 11, 1995, options (net of canceled or expired options) covering
an aggregate of 82,000 shares of the Company's Common Stock had been granted
under the 1995 Plan, and 918,000 shares (plus any shares that might in the
future be returned to the plans as a result of cancellations or expiration of
options) remained available for future grant under the 1995 Plan. During the
last fiscal year, under the 1995 Plan, the Company did not grant options to any
current executive officers or current directors. In January 1996, the Board
approved an amendment and restatement of the 1995 Plan to reflect current
applicable tax and securities requirements and for administrative ease.
The Board included in the 1995 Plan, as amended and restated, provisions to
maximize the ability of the Company, under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), to deduct as a business expense
certain compensation attributable to the exercise of stock options granted under
the 1995 Plan. Section 162(m) denies a deduction to any publicly held
corporation for certain compensation paid to specified employees in a taxable
year to the extent that the compensation exceeds $1,000,000 for any covered
employee. See "Federal Income Tax Information" below for a discussion of the
application of Section 162(m). In light of the Section 162(m) requirements, the
Board has amended the 1995 Plan, subject to stockholder approval, to include a
limitation providing that no person may be granted options under the 1995 Plan
during a calendar year to purchase in excess of 450,000 shares of Common Stock.
Previously, no such formal limitation was placed on the number of shares
available for option grants to an employee. In addition, the 1995 Plan was
amended to provide that, in the Board's discretion, directors who grant options
to covered employees may be "outside directors" as defined in Section 162(m).
For a description of this requirement, see "Administration."
Stockholders are requested in this Proposal 3 to approve the 1995 Plan as
adopted and as amended and restated. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote at the meeting will be required to approve the 1995 Plan as adopted and as
amended and restated. Abstentions will be counted toward the tabulation of votes
cast on proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes
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are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the 1995 Plan are outlined below:
GENERAL
The 1995 Plan provides for the grant of both incentive and nonstatutory stock
options. Incentive stock options granted under the 1995 Plan are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code. Nonstatutory stock options granted under the 1995 Plan are intended not to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of incentive and nonstatutory
stock options.
PURPOSE
The 1995 Plan was adopted to provide a means by which selected officers and
employees of and consultants to the Company and its affiliates could be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of employees holding key positions, to secure and retain the services
of persons capable of filling such positions and to provide incentives for such
persons to exert maximum efforts for the success of the Company. Approximately
160 of the Company's approximately 940 employees and consultants are eligible to
participate in the 1995 Plan.
ADMINISTRATION
The 1995 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1995 Plan and, subject to the
provisions of the 1995 Plan, to determine the persons to whom and the dates on
which options will be granted, the number of shares to be subject to each
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration and other terms of the option. The Board of Directors is
authorized to delegate administration of the 1995 Plan to a committee composed
of not fewer than two members of the Board. The Board has delegated
administration of the 1995 Plan to the Stock Option Committee of the Board. As
used herein with respect to the 1995 Plan, the "Board" refers to the Stock
Option Committee as well as to the Board of Directors itself.
The regulations under Section 162(m) require that the directors who serve as
members of the Stock Option Committee must be "outside directors." The 1995 Plan
has been amended, subject to stockholder approval, to provide that, in the
Board's discretion, directors serving on the Committee will also be "outside
directors" within the meaning of Section 162(m). This limitation would exclude
from the Stock Option Committee (i) current employees of the Company, (ii)
former employees of the Company receiving compensation for past services (other
than benefits under a tax-qualified pension plan), (iii) current and former
officers of the Company, (iv) directors currently receiving direct or indirect
remuneration from the Company in any capacity (other than as a director), unless
any such person is otherwise considered an "outside director" for purposes of
Section 162(m).
ELIGIBILITY
Incentive stock options may be granted under the 1995 Plan only to selected
key employees (including officers) of the Company and its affiliates. Selected
key employees (including officers) and consultants are eligible to receive
nonstatutory stock options under the 1995 Plan. Directors who are not salaried
employees of or consultants to the Company or to any affiliate of the Company
are not eligible to participate in the 1995 Plan.
8
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No incentive stock option may be granted under the 1995 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock options granted under the 1995 Plan, the aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which such options are exercisable for the first time by an optionee
during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000.
Subject to stockholder approval of this Proposal 3, the Company has added to
the 1995 Plan, as amended and restated, a per-person, per-calendar year
limitation equal to 450,000 shares of Common Stock. The purpose of adding this
limitation is to maximize the Company's ability to deduct for tax purposes the
compensation attributable to the exercise of options granted under the 1995
Plan. Previously, the Board or the Stock Option Committee determined in its
discretion the number of shares subject to an option for any employee and no
such formal limitation was placed on the number of shares available for an
option to an optionee. To date, the Company has not granted to any employee in
any calendar year period options to purchase a number of shares equal to or in
excess of the limitation.
STOCK SUBJECT TO THE 1995 PLAN
If options granted under the 1995 Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the 1995 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1995 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options under
the 1995 Plan may not be less than the fair market value of the Common Stock
subject to the option on the date of the option grant, and in some cases (see
"Eligibility" above), may not be less than 110% of such fair market value. The
exercise price of nonstatutory options under the 1995 Plan may not be less than
85% of the fair market value of the Common Stock subject to the option on the
date of the option grant. However, if options were granted with exercise prices
below market value, deductions for compensation attributable to the exercise of
such options could be limited by Section 162(m). See "Federal Income Tax
Information." At December 11, 1995, the closing price of the Company's Common
Stock as reported on the Nasdaq System was $16.875 per share.
In the event of a decline in the value of the Company' s Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. The Company has provided that opportunity to employees in
the past. To the extent required by Section 162(m), an option repriced under the
1995 Plan is deemed to be canceled and a new option granted. Both the option
deemed to be canceled and the new option deemed to be granted will be counted
against the 450,000 share limitation.
The exercise price of options granted under the 1995 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or, pursuant to the terms of the
1995 Plan as amended and restated, (c) in any other form of legal consideration
acceptable to the Board.
Option Exercise. Options granted under the 1995 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
currently outstanding options under the 1995 Plan typically vest in four equal
annual installments (at the rate of 25% per year) during the optionee's
employment or services as a consultant. Shares covered by options granted in the
future under the 1995 Plan may be subject to different vesting terms. The Board
has the power to accelerate the time during which an option may be exercised. In
addition, options granted under the 1995 Plan, as amended and restated, may
permit exercise prior to vesting, but in such event the optionee may be required
9
<PAGE>
to enter into an early exercise stock purchase agreement that allows the Company
to repurchase shares not yet vested at their exercise price should the optionee
leave the employ of the Company before vesting. To the extent provided by the
terms of an option, an optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash payment
upon exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee, by delivering already-owned stock of the
Company or by a combination of these means.
Term. The maximum term of options under the 1995 Plan is ten years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options granted under the 1995 Plan, prior to its amendment and restatement, may
be exercised (to the extent vested upon termination of service) for 30 days
after termination of the optionee's employment or relationship as a consultant
or director of the Company or an affiliate, unless (a) such termination is due
to the optionee's death or permanent and total disability (as defined in the
Code), in which case the option terminates one year after such termination of
service; or (b) such termination is due to the optionee's retirement after
attainment of age 65 or by reason of resignation of employment or status as a
consultant or director with the prior consent of the Board, in which case the
option terminates three months after such termination. Options granted under the
1995 Plan, subsequent to its amendment and restatement, may be exercised (to the
extent vested upon termination of service) for three months after termination of
the optionee's employment or relationship as a consultant or director of the
Company or any affiliate of the Company, unless (a) such termination is due to
such person's permanent and total disability (as defined in the Code), in which
case the option may, but need not, provide that it may be exercised at any time
within one year of such termination; (b) the optionee dies while employed by or
serving as a consultant or director of the Company or any affiliate of the
Company, or within three months after termination of such relationship, in which
case the option may, but need not, provide that it may be exercised within
eighteen months of the optionee's death by the person or persons to whom the
rights to such option pass by will or by the laws of descent and distribution;
or (c) the option by its terms specifically provides otherwise. Individual
options by their terms may provide for exercise within a longer period of time
following termination of employment or the consulting relationship. The option
term may also be extended in the event that exercise of the option within these
periods is prohibited for specified reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1995 Plan or subject to
any option granted under the 1995 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1995 Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to an employee during a calendar year period, and the
class, number of shares and price per share of stock subject to such outstanding
options.
EFFECT OF CERTAIN CORPORATE EVENTS
For options granted under the 1995 Plan, prior to its amendment and
restatement, the time during which such options may be exercised will be
accelerated so that such options will be fully exercisable in the event of (a)
approval by the stockholders of a plan of liquidation or dissolution or
specified type of merger or other corporate reorganization; (b) the replacement
of a majority of the members of the Board as it was constituted on June 30,
1995, unless such replacements are approved by the vote of at least a majority
of such members; or (c) the acquisition by any individual, entity or group of
beneficial ownership of 25% or more of the combined voting power of
then-outstanding securities of the Company entitled to vote (excluding
acquisitions (i) directly from or by the Company or an affiliate or their
benefit plans, or (ii) pursuant to any transaction in which more than 50% of the
beneficial owners of outstanding voting securities remains substantially the
same as prior to such transaction or in which no entity (other than the Company,
any affiliate or certain significant stockholders) will beneficially own 25%
or more of the then-outstanding securities of the Company entitled to
vote. The 1995 Plan, subsequent to its amendment and restatement, provides
that in the event of a (a) dissolution or liquidation of the Company; (b)
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<PAGE>
specified type of merger; or (c) other corporate reorganization, then, to the
extent permitted by law, the time during which such options may be exercised
will be accelerated and the options terminated if not exercised after such
acceleration and at or prior to such event. The acceleration of an option in the
event of an acquisition or similar corporate event may be viewed as an
antitakeover provision, which may have the effect of discouraging a proposal to
acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1995 Plan without stockholder approval
or ratification at any time or from time to time. Unless sooner terminated, the
1995 Plan will terminate on July 17, 2005.
The Board may also amend the 1995 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval in
order for the Plan to satisfy Section 422 of the Code, if applicable, or Rule
16b-3 of the Exchange Act); (b) increase the number of shares reserved for
issuance upon exercise of options; or (c) change any other provision of the Plan
in any other way if such modification requires stockholder approval in order to
comply with Rule 16b-3 or satisfy the requirements of Section 422 of the Code.
The Board may submit any other amendment to the 1995 Plan for stockholder
approval, including, but not limited to, amendments intended to satisfy the
requirements of Section 162(m) of the Code regarding the exclusion of
performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
All stock options granted under the 1995 Plan, prior to its amendment and
restatement, and all incentive stock options whenever granted under the 1995
Plan may only be transferred by the optionee by will or by the laws of descent
and distribution and, during the lifetime of the optionee, may be exercised only
by the optionee. A nonstatutory stock option granted under the 1995 Plan,
subsequent to its amendment and restatement, may only be transferred by will or
by the laws of descent and distribution or pursuant to a "qualified domestic
relations order." In any case, however, the optionee may designate in writing a
third party who may exercise the option in the event of the optionee's death. In
addition, shares subject to repurchase by the Company under an early exercise
stock purchase agreement may be subject to restrictions on transfer which the
Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1995 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or the
Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
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<PAGE>
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
1995 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of the
grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that the option is granted by a stock option committee
comprised solely of "outside directors" and either: (i) the option plan contains
a per-employee limitation on the number of shares for which options may be
granted during a specified period, the per-employee limitation is approved by
the stockholders, and the exercise price of the option is no less than the fair
market value of the stock on the date of grant; or (ii) the option is granted
(or exercisable) only upon the achievement (as certified in writing by the stock
option committee) of an objective performance goal established in writing by the
stock option committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
PROPOSAL 4
APPROVAL OF THE ADOPTION OF THE 1996 NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN
In January 1996, the Board of Directors adopted, subject to stockholder
approval, the Company's 1996 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan"). The Directors' Plan provides for automatic,
non-discretionary grants of options to purchase an aggregate of 200,000 shares
of the Company's Common Stock.
Stockholders are requested in this Proposal 4 to approve the Directors' Plan,
including the reservation of 200,000 shares of Common Stock for issuance
thereunder. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the Directors' Plan. Abstentions will
will be counted toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative votes. Broker
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<PAGE>
non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
The essential features of the Directors' Plan are outlined below:
GENERAL
The Directors' Plan provides for non-discretionary grants of nonstatutory
stock options. Options granted under the Directors' Plan are not intended to
qualify as incentive stock options, as defined under Section 422 of the Code.
PURPOSE
The purpose of the Directors' Plan is to retain the services of persons now
serving as Non-Employee Directors of the Company (as defined below), to attract
and retain the services of persons capable of serving on the Board of Directors
of the Company and to provide incentives for such persons to exert maximum
efforts to promote the success of the Company.
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors of the Company.
The Board of Directors has the final power to construe and interpret the
Directors' Plan and options granted under it, and to establish, amend and revoke
rules and regulations for its administration.
The Board of Directors is authorized to delegate administration of the
Directors' Plan to a committee of not less than two members of the Board. The
Board of Directors does not presently contemplate delegating administration of
the Directors' Plan to any committee of the Board of Directors.
ELIGIBILITY
The Directors' Plan provides that options may be granted only to Non-Employee
Directors of the Company. A "Non-Employee Director" is defined in the Directors'
Plan as a director of the Company and its affiliates who is not otherwise an
employee of the Company or any affiliate. Three of the Company's four current
directors and its nominee for the vacancy on the Board will be eligible to
participate in the Directors' Plan.
TERMS OF OPTIONS
Each option under the Directors' Plan is subject to the following terms and
conditions:
Non-Discretionary Grants. Each person who is, after September 30, 1995, first
elected to be a Non-Employee Director shall automatically be granted an option
to purchase 15,000 shares of Common Stock upon the date of such election. Each
year, commencing with calendar year 1997, on the day following the day of the
annual stockholder meeting of the Company, each person who is then a Non-
Employee Director and has been a Non-Employee Director for at least four months,
shall automatically be granted an option to purchase 5,000 shares of Common
Stock.
Option Exercise. An option granted under the Directors' Plan becomes
exercisable over a four- year period in 48 equal monthly installments. Such
vesting is conditioned upon continued service as a Non-Employee Director or
employee of or consultant to the Company or an affiliate.
Exercise Price; Payment. The exercise price of options granted under the
Directors' Plan shall be equal to 100% of the fair market value of the Common
Stock subject to such options on the date such option is granted. The exercise
price of options granted under the Directors' Plan must be paid at the time the
option is exercised in cash or by delivery of other Common Stock of the Company.
Transferability; Term. Under the Directors' Plan, an option may not be
transferred by the optionee, except by will or the laws of descent and
distribution, or pursuant to a "qualified domestic relations order." No option
granted under the Directors' Plan is exercisable by any person after the
expiration of ten years from the date the option is granted.
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Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as may be
determined by the Board of Directors.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or subject
to any option granted under the Directors' Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Directors' Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to the Directors' Plan and the class, number of
shares and price per share of stock subject to outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger or
other corporate reorganization, to the extent permitted by law, the time during
which outstanding options may be exercised shall be accelerated and the options
terminated if not exercised after such acceleration and at or prior to such
event. The acceleration of an option in the event of an acquisition or similar
corporate event may be viewed as an antitakeover provision, which may have the
effect of discouraging a proposal to acquire or otherwise obtain control of the
Company.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the Directors' Plan at
any time or from time to time; provided, however, that the Board may not amend
the Directors' Plan with respect to the amount, price or timing of grants more
often than once every six months other than to comport with changes to the Code
or the Employee Retirement Income Security Act of 1974, as amended. No amendment
will be effective unless approved by the stockholders of the Company within
twelve months before or after its adoption by the Board if the amendment would:
(i) increase the number of shares reserved for options under the plan; (ii)
modify the requirements as to eligibility for participation in the plan (to the
extent such modification requires stockholder approval in order for the plan to
comply with the requirements of Rule 16b-3); or (iii) modify the plan in any
other way if such modification requires stockholder approval in order for the
plan to meet the requirements of Rule 16b-3. The Directors' Plan shall terminate
at the discretion of the Board.
CERTAIN FEDERAL INCOME TAX INFORMATION
Stock options granted under the Directors' Plan are subject to federal income
tax treatment pursuant to rules governing options that are not incentive stock
options.
The following is only a summary of the effect of federal income taxation upon
the optionee and the Company with respect to the grant and exercise of options
under the Directors' Plan, does not purport to be complete and does not discuss
the income tax laws of any state or foreign country in which an optionee may
reside.
Options granted under the Directors' Plan are nonstatutory options. There are
no tax consequences to the optionee or the Company by reason of the grant of a
nonstatutory stock option. Upon exercise of a nonstatutory stock option, the
optionee normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value on the date of exercise over the option exercise
price. Because the optionee is a director of the Company, under existing laws,
the date of taxation (and the date of measurement of taxable ordinary income)
may in some instances be deferred unless the optionee files an election under
Section 83(b) of the Code. The filing of a Section 83(b) election with respect
to the exercise of an option may affect the time of taxation and the amount of
income recognized at each such time. Upon disposition of the stock, the optionee
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of such option. Such gain or loss
will be long or short-term depending on whether the stock was held for more than
one year.
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NEW PLAN BENEFITS
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
----------------------------------------------
NUMBER OF SHARES SUBJECT
NAME AND POSITION DOLLAR VALUE(2) TO OPTIONS GRANTED
- ----------------- --------------- ------------------------
Alan C. Mendelson(1) ................ 234,375 15,000
Director
All Non-Employee Directors
as a Group(3 ........................ 234,375 15,000
- ----------
(1) The grant to Mr. Mendelson is subject to shareholder approval of Proposal 4.
(2) Exercise price ($15.625) multiplied by the number of shares underlying
the option.
(3) In addition to the above grant, pursuant to the terms of the Directors'
Plan, Mr. Jeffries, upon his election as a Non-Employee Director of the
Company at the Annual Meeting (see Proposal 1) and the approval of Proposal
4, will automatically be granted options to purchase 15,000 shares each of
the Company's common stock. Such grant will be effective on the date of the
Annual Meeting and will be priced at the fair market value on the date of
grant.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
the Company's Common Stock as of December 11, 1995 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table employed by the Company in that capacity on December 11,
1995; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
BENEFICIAL OWNERSHIP(1)
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
---------------- --------- ----------
Milan Mandaric(2)........................................4,000,000 44.3%
C. Bradford Jeffries .................................... 0 *
Peter S. Jonas(2) ....................................... 510,000 5.7%
Roland G. Matthews(2)(3) ................................ 584,730 6.5%
Alan C. Mendelson ....................................... 11,000 *
W. Barry Hegarty ........................................ 30,000 *
Michael S. Shimada(4) ................................... 26,125 *
All executive officers and directors as a group
(7 persons)4) ..........................................5,161,880 57.2%
- ----------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
9,023,930 shares outstanding on December 11, 1995, adjusted as required by
rules promulgated by the SEC.
(2) The mailing address of the stockholder is c/o Elexsys International, Inc.,
1188 Bordeaux Drive, Sunnyvale, California 94089.
(3) Shares held in the name of a family limited partnership, of which Mr.
Matthews and his wife are the general partners.
(4) Includes 17,300 shares which Michael S. Shimada, an executive officer of the
Company, has the right to acquire within 60 days after the date of this
table pursuant to outstanding options.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent shareholders stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that two
reports, covering four transactions, were filed late by Mr. Mandaric and one
report, covering one transaction, was filed late by Mr. Hegarty.
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EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Mr. Mandaric does not receive any compensation for serving on the Board in
addition to his compensation as an employee of the Company.
For his service on the Board of Directors and as a consultant to the Company,
Mr. Jonas received $15,000 per month during the fiscal year ended September 30,
1995. For his service on the Board of Directors, commencing October 1, 1995, Mr.
Jonas receives $2,500 per month. Benefits received by Mr. Jonas include certain
medical insurance benefits available to founding directors, in addition to the
Company's general group health plan, at a total cost to the Company for the year
ended September 30, 1995 of $20,698 and for the use of a Company automobile
valued at $2,052 for the fiscal year ended September 30, 1995.
For their service on the Board of Directors, Messrs. Jeffries and Mendelson
will receive an annual retainer of $7,500 and $1,500 for each meeting of the
Board attended.
For his service on the Board of Directors, Mr. Matthews receives $2,500 per
month. Benefits received by Mr. Matthews include certain medical insurance
benefits available to founding directors, in addition to the Company's general
group health plan, at a total cost to the Company for the year ended September
30, 1995 of $2,824.
For his service on the Board of Directors, Charles Handley, a former director
of the Company, received $9,500.
In the fiscal year ended September 30, 1995, the total compensation paid to
Non-Employee Directors was $245,074. The members of the Board of Directors are
also eligible for reimbursement for their expenses incurred in connection with
attendance at Board meetings in accordance with Company policy.
In January 1996, the Board adopted the Directors' Plan (see Proposal 4) to
provide for the automatic grant of options to purchase shares of the Company's
Common Stock to Non-Employee Directors of the Company.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended September 30, 1993, 1994
and 1995, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its two other executive officers at September 30, 1995
(the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
--------------
ANNUAL
COMPENSATION AWARDS
------------ --------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS/ COMPENSATION
POSITION YEAR ($) ($) (#) ($)
-------- ---- ------ ----- -------------- ------------
Milan Mandaric ............1995 12 50,000 0 0
Chief Executive Officer 1994 0 0 0 0
1993 0 0 0 0
W. Barry Hegarty ....... 1995 105,000 60,000 100,000 5,070
Chief Operating Officer 1994 0 0 0 0
1993 0 0 0 0
Michael S. Shimada .... 1995 130,000 15,000 0 10,956
Chief Financial Officer 1994 106,290 0 47,000 107,106
1993 131,250 0 [15,000](1) 222
- ----------
(1) Options expired during fiscal year ended September 30, 1993 and are no
longer exercisable.
18
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
During the last fiscal year, the Company granted options to one executive
officer under its 1994 Incentive Stock Option Plan (the "1994 Option Plan"). As
of December 11, 1995, options to purchase a total of 404,680 shares were
outstanding under the 1994 Option Plan and options to purchase 64,850 shares
remained available for grant thereunder.
The following table shows for the fiscal year ended September 30, 1995,
certain information regarding options granted to and held at year end by, the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM(1)
- ------------------------------------------------------------------- -------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEES EXERCISE OR
GRANTED IN FISCAL BASE PRICE EXPIRATION
NAME (#)(2) YEAR (%)(3) ($/SH) DATE 5% ($) 10% ($)
- ---- ---------- ----------- ---------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mandaric .... 0 0 -- -- -- --
Mr. Hegarty ..... 100,000 22.8 3.63 04/20/05 228,690 591,690
Mr. Shimada ..... 0 0 -- -- -- --
<FN>
- ----------
(1) The potential realizable value is based on the ten-year term of the option
at its time of grant. It is calculated by assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock price. No
gain to the optionee is possible unless the stock price increases over the
option term, which will benefit all stockholders.
(2) Options generally vest over a four-year period, 25% per year with a ten-year
term. The options will fully vest upon a change of control, as defined in
the Company's 1994 Option Plan.
(3) Based on 439,500 options granted under the Company's option plans in the
fiscal year ended September 30, 1995.
</FN>
</TABLE>
During the fiscal year ended September 30, 1995, no options were exercised by
the Named Executive Officers.
SEVERANCE ARRANGEMENTS
The Company has severance arrangements (the "Arrangements") with each of
Messrs. Shimada and Hegarty (the "Executives"). If an Executive's employment is
terminated without cause by the Company, the Executive will receive monthly
payments equal to his monthly salary at the time of termination for six months,
in the case of Mr. Hegarty, or 12 months, in the case of Mr. Shimada, or until
his earlier reemployment. In the case of Mr. Shimada, if there is a change in
control of the Company and his employment is terminated within 18 months
following the change in control, either without cause by the Company or for good
reason by him, he will instead receive a lump sum cash payment equal to two
years' salary.
If any portion of the Executive's severance compensation under the
Arrangement (i) exceeds the total amount of payments or benefits which could be
received by the Executive from the Company pursuant to Section 280G of the Code;
or (ii) is subject to the excise tax imposed by Section 4999 of the Code, such
payments or benefits shall be reduced to the extent necessary to comply with the
limitation.
On October 3, 1994, Mr. Jonas resigned as an officer of the Company but
continues to serve as a director. In addition, Mr. Jonas served as a consultant
to the Company through September 1995. Pursuant to the terms of an agreement
with the Company, Mr. Jonas received as consulting fees monthly payments
19
<PAGE>
equal to his monthly salary at the time of his resignation for a period of 12
months, ended in September 1995. In addition, Mr. Jonas received through
September 1995 the same employee benefits he received immediately prior to his
resignation.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The following report of the Board of Directors shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Company does not have a compensation committee. The Board of Directors
makes all decisions regarding compensation of executive officers. The primary
components of executive compensation consist of annual compensation, which
includes base salaries and annual bonuses, and long-term compensation through
the grant of options to purchase Common Stock. Though the aim of the Company is
to maximize stockholder value, compensation for the executive officers is not
primarily related to the overall performance of the Company. The Board of
Directors' principal philosophy is one of fairness and executive officers are
judged on their individual merits, which is the standard of evaluation for all
employees of the Company.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Stock Option Committee has determined that certain stock options granted
under the Company's 1995 Plan with an exercise price of at least equal to the
fair market value of the Company's common stock on the date of grant may be
treated as "performance-based compensation." As a result, the Company's
stockholders have been asked to approve an amendment to the 1995 Plan to
maximize the Company's ability to take a business expense deduction in
connection with the grant of such a stock option.
The base salary levels of executive officers (other than Mr. Mandaric) are
determined periodically by evaluating the performance of the executive officers
and their contributions to the Company, and their responsibilities, experience
and potential. Mr. Mandaric was paid a nominal salary during fiscal 1995.
The annual bonuses of the executive officers are determined in the discretion
of the Board of Directors based on individual performance and the financial
performance of the Company. The Company has a discretionary profit sharing bonus
plan that provides for payment of bonuses to all eligible employees in
accordance with the achievement of certain performance standards. The amount an
employee, including an executive officer, receives is determined in the
discretion of management. The determination of Mr. Mandaric's bonus for fiscal
1995 was based upon a number of factors, including increases in revenues and net
income over the prior year, increases in the Company's stock price and the
market capitalization of the Company and balance sheet improvements, such as
greater working capital and stockholders' equity.
Board of Directors
Milan Mandaric
Alan C. Mendelson
Roland G. Matthews
Peter S. Jonas
- ----------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended or the Exchange Act whether made
before or after the date hereof and irrespective of any general incorporation
language in any such filing.
20
<PAGE>
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jonas, a member of the Board since 1980, served as an officer of the
Company from September 1980 to October 1994, during which period he served as
President and Chief Executive Officer of the Company from February 1993 to
October 1994. Mr. Matthews, a member of the Board since 1980, served as an
officer of the Company from September 1980 to March 1993. Additionally, Mr.
Mandaric, the Company's President and Chief Executive Officer, serves as
Chairman of the Board.
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on September 30, 1990 for (i) the Company's Common Stock, (ii) the
NASDAQ Stock Market - U.S. Index and (iii) a Peer Group consisting of Altron,
Incorporated. (ALRN), Circuit Systems, Inc. (CSYI), Data- Design Laboratories,
Inc. (DDL), Hadco Corp. (HDCO), Merix Corp. (MERX), Parlex Corp. (PRLX), Sanmina
Corp. (SANM), Sheldahl Inc., (SHEL) and Sigma Circuits, Inc. (SIGA) (the "Peer
Group"). All values assume reinvestment of the full amount of all dividends and
are calculated as of September 30 of each year:
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ELEXSYS INTERNATIONAL INC., THE NASDAQ STOCK MARKET--U.S. INDEX
AND A PEER GROUP
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Elexsys International Inc. $100 $ 78 $ 70 $ 35 $ 46 $530
Peer Group 100 93 98 211 205 439
NASDAQ Group Market--U.S. 100 157 176 231 233 321
* $100 invested on 09/30/90 in stock or index including reinvestment of
dividends. Fisal year ending September 30.
- ----------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended or the Exchange Act whether made
before or after the date hereof and irrespective of any general incorporation
language in any such filing.
21
<PAGE>
CERTAIN TRANSACTIONS
The Company and Milan Mandaric, the Company's Chairman of the Board,
President and Chief Executive Officer, entered into a Second Securities Exchange
Agreement dated as of March 29, 1995 (the "Agreement").
Pursuant to the Agreement, on March 31, 1995 (the "Closing Date") Mr.
Mandaric exchanged an aggregate of $4,000,000 in principal amount of the
Company's outstanding 5-1/2% Convertible Subordinated Debentures due 2012 (the
"Debentures") for 400,000 newly issued shares of the Company's Common Stock, par
value $1.00 per share. In addition, the Company paid to Mr. Mandaric $18,333, an
amount equal to the accrued but unpaid interest on the Debentures through the
Closing Date.
CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche, which has been the Company's independent certified public
accountants since the Company's inception, will continue to serve in that
capacity for the current fiscal year. It is anticipated that representatives of
Deloitte & Touche will be present at the Annual Meeting and will be provided
with an opportunity to make a statement if they so desire and to respond to
appropriate questions from stockholders.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Michael S. Shimada
Secretary
January 12, 1996
22
<PAGE>
APPENDIX A
ELEXSYS INTERNATIONAL, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON JANUARY 8, 1996
APPROVED BY STOCKHOLDERS
ON January __, 1996
1. PURPOSE.
(a) The purpose of the 1996 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Elexsys
International, Inc. (the "Company") who is not otherwise at the time of grant an
employee of or consultant to the Company or of any Affiliate of the Company
(each such person being hereafter referred to as a "Non-Employee Director") will
be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
1.
<PAGE>
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate two hundred thousand (200,000)
shares of the Company's common stock. If any option granted under the Plan shall
for any reason expire or otherwise terminate without having been exercised in
full, the stock not purchased under such option shall again become available for
the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, after September 30, 1995, elected for the first
time to be a Non-Employee Director automatically shall, upon the date of initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to
2.
<PAGE>
purchase fifteen thousand (15,000) shares of common stock of the Company on the
terms and conditions set forth herein.
(b) Each year, commencing with calendar year 1997, on the day following
the day of the annual meeting of the stockholders of the Company, each person
who is then a Non-Employee Director and has been a Non-Employee Director for at
least four (4) months automatically shall be granted an option to purchase five
thousand (5,000) shares of common stock of the Company on the terms and
conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date twelve (12) months following
the date of termination of all such service; provided, however, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of the optionee's death. In any and all circumstances, an
option may be exercised following termination of the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate only as to that number of shares as to which it was exercisable as of
the date of termination of all such service under the provisions of subparagraph
6(e).
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.
3.
<PAGE>
(c) The optionee may elect to make payment of the exercise price under
one of the following alternatives:
(i) Payment of the exercise price per share in cash at the
time of exercise; or
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board which results in the receipt of cash (or check) by the Company either
prior to the issuance of shares of the Company's common stock or pursuant to the
terms of irrevocable instructions issued by the optionee prior to the issuance
of shares of the Company's common stock.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 under the Securities Exchange Act of
1934 ("Rule 16b-3") and shall be exercisable during the lifetime of the person
to whom the option is granted only by such person (or by his guardian or legal
representative) or transferee pursuant to such an order. Notwithstanding the
foregoing, the optionee may, by delivering written notice to the Company in a
form satisfactory
4.
<PAGE>
to the Company, designate a third party who, in the event of the death of the
optionee, shall thereafter be entitled to exercise the option.
(e) The option shall become exercisable in installments over a period
of four years from the date of grant as follows: one forty-eighth (1/48) of the
shares shall vest each month commencing on the date of grant of the option,
provided that the optionee has, during the entire period prior to such vesting
date, continuously served as a Non-Employee Director, employee or consultant to
the Company or any Affiliate of the Company, whereupon such option shall become
fully exercisable in accordance with its terms with respect to that portion of
the shares represented by that installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of
5.
<PAGE>
granting an option to the optionee or permitting the optionee to exercise the
option. The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
(h) The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that any optionee
not sell or otherwise transfer or dispose of any shares of common stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of
6.
<PAGE>
stock upon exercise of the options granted under the Plan; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any option granted under the Plan, or any stock
issued or issuable pursuant to any such option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
7.
<PAGE>
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or stockholders or any Affiliate to remove any Non-Employee
Director pursuant to the Company's By-Laws and the provisions of the Delaware
General Corporation Law (or the laws of the Company's state of incorporation
should that change in the future).
(d) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(f) As used in this Plan, "fair market value" means, as of any date,
the value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the
8.
<PAGE>
closing bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in common stock) on the last
market trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(ii) If the common stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(iii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding, and conclusive.
9.
<PAGE>
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or groups within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any comparable successor provisions (excluding
any employee benefit plan, or related trust, approved or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then to the extent not prohibited by applicable law: the time during
which options outstanding under the Plan may be exercised shall be accelerated
prior to such event and the options terminated if not exercised after such
acceleration and at or prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act,
10.
<PAGE>
or the rules thereunder. Except as provided in paragraph 10 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares which may be issued
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to comply with the requirements of Rule 16b-3);
or
(iii) Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to comply with
the requirements of Rule 16b-3 or Section 162(m) of the Internal Revenue Code.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
11.
<PAGE>
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
12.
<PAGE>
APPENDIX B
ELEXSYS INTERNATIONAL, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
Adopted January 8, 1996
Approved by Shareholders on January ____, 1996
1. PURPOSE.
(a) The purpose of the 1996 Employee Stock Purchase Plan (the "Plan")
is to provide a means by which employees of Elexsys International, Inc., a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be
given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
<PAGE>
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section 423
of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate two hundred fifty thousand
(250,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of
2.
<PAGE>
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
memorandum documenting the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
3.
<PAGE>
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no more than twenty-seven (27) months after
the Offering Date. The Board or the Committee shall establish one or more dates
during an Offering (the "Purchase Date(s)") on which rights granted under the
Plan shall be exercised and purchases of Common Stock carried out in accordance
with such Offering. In connection with each Offering made under this Plan, the
Board or the Committee may specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than one Purchase
Date (as defined in the relevant Offering), the Board or the Committee may
specify a maximum aggregate number of shares which may be purchased by all
eligible employees on any given Purchase Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Board or the Committee shall
make a pro rata
4.
<PAGE>
allocation of the shares available in as nearly a uniform manner as shall be
practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company
intended to comply with Section 401(k), Section 402(e)(3), Section 125, Section
402(h), or Section 403(b) of the Code, and also including any deferrals under a
non-qualified deferred compensation plan or arrangement established by the
Company), which shall include or exclude bonuses, commissions, overtime pay,
incentive pay, profit sharing, other remuneration paid directly to the employee,
the cost of employee benefits paid for by the Company or an Affiliate, education
or tuition reimbursements, imputed income arising under any group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company or an Affiliate under any employee benefit plan, and similar items of
compensation, as determined by the Board or Committee. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase or begin such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the
5.
<PAGE>
Offering, without interest, and such participant's interest in that Offering
shall be automatically terminated. A participant's withdrawal from an Offering
will have no effect upon such participant's eligibility to participate in any
other Offerings under the Plan but such participant will be required to deliver
a new participation agreement in order to participate in subsequent Offerings
under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by beneficiary designation as provided in paragraph 14, and shall be exercisable
only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each Purchase Date, each participant's accumulated payroll
deductions and other additional payments specifically provided for in the
Offering (without any increase for interest) will be applied to the purchase of
whole shares of stock of the Company, up to the maximum number of shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional shares shall be issued
upon the exercise of rights granted under the Plan. The amount, if any, of
accumulated payroll deductions remaining in each participant's account after the
purchase of shares which is less than the amount required to purchase one share
of stock on the final Purchase Date of an Offering shall be held in each such
participant's account for the purchase of shares under the next Offering under
the Plan, unless such participant withdraws from such next Offering, as provided
in subparagraph 7(b), or is no longer eligible to be granted rights under the
Plan, as provided in paragraph 5, in which case such amount shall be distributed
to the participant after the final Purchase Date of the Offering, without
interest. The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase whole shares of stock on the final Purchase Date of an
Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on said
Purchase Date and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than two (2) months and the Purchase
Date
6.
<PAGE>
shall in no event be more than twenty-seven (27) months from the Offering Date.
If on the Purchase Date of any Offering hereunder, as delayed to the maximum
extent permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A SHAREHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not including the receipt of consideration by the
Company.")
7.
<PAGE>
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under
the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan (to the extent such modification requires shareholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-
3")); or
(iii) Modify the Plan in any other way if such modification
requires shareholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted or except as necessary to
comply with any laws or governmental regulation.
8.
<PAGE>
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No rights
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted or except as necessary to comply with any laws
or governmental regulation.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the shareholders of the Company.
9.
<PAGE>
APPENDIX C
ELEXSYS INTERNATIONAL, INC.
1995 STOCK OPTION PLAN
ADOPTED JULY 19, 1995
AMENDED AND RESTATED JANUARY 8, 1996
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
1.
<PAGE>
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Elexsys International, Inc., a Delaware
corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means
that the service of an individual to the Company, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between the Company, Affiliates or their
successors.
(h) "Covered Employee" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be
2.
<PAGE>
reported to stockholders under the Exchange Act, as determined for purposes of
Section 162(m) of the Code.
(i) "Director" means a member of the Board.
(j) "Disinterested Person" means a Director who either (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any affiliate entitling the participants therein to acquire equity securities
of the Company or any affiliate except as permitted by Rule 16b-3(c)(2)(i); or
(ii) is otherwise considered to be a "disinterested person" in accordance with
Rule 16b-3(c)(2)(i), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) Less Flexibility: "Fair Market Value" means, as of any date, the
value of the common stock of the Company determined as follows: (1) If the
common stock is listed on any established stock exchange or a national market
system, including without limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System,
the Fair Market Value of a share of common stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such system or exchange (or the exchange with the greatest volume of trading
in common stock) on the last market trading day prior to the
3.
<PAGE>
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(s) "Optionee" means a person who holds an outstanding Option.
4.
<PAGE>
(t) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means this Elexsys International, Inc. 1995 Stock Option
Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Options; when and how each Option shall
be granted; whether an Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the provisions of each Option granted (which need not
be identical), including the time or times such Option may be exercised in whole
or in part; and the number of shares for which an Option shall be granted to
each such person.
5.
<PAGE>
(2) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Options to eligible persons who (1) are not then subject to Section 16 of
the Exchange Act and/or (2) are either (i) not then Covered Employees and are
not expected to be Covered Employees at the time of recognition of income
resulting from such Option, or (ii) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code.
6.
<PAGE>
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate One Million (1,000,000) shares of the Company's common
stock. If any Option shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full, the stock not purchased
under such Option shall revert to and again become available for issuance under
the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Options may be granted, or in the determination of the
number of shares which may be covered by Options granted to the Director: (i)
the Board has delegated its discretionary authority over the Plan to a Committee
which consists solely of Disinterested Persons; or (ii) the Plan otherwise
complies with the requirements of Rule 16b-3. The Board shall otherwise comply
with the requirements of Rule 16b-3. This subsection 5(b) shall not apply if the
Board or Committee expressly declares that it shall not apply.
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(c) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
(d) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than Four Hundred Fifty Thousand (450,000) shares of the Company's
common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than
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that set forth in the preceding sentence if such Option is granted pursuant to
an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to
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whom the Option is granted only by such person or any transferee pursuant to a
QDRO. The person to whom the Option is granted may, by delivering written notice
to the Company, in a form satisfactory to the Company, designate a third party
who, in the event of the death of the Optionee, shall thereafter be entitled to
exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Securities Law Compliance. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling
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or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may require the Optionee to provide such other
representations, written assurances or information which the Company shall
determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(g) Termination of Employment or Relationship as a Director or
Consultant. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant, or such longer or shorter period specified in the Option
Agreement, or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
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terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(i) Death of Optionee. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time
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of death, the Optionee was not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require
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the Company to register under the Securities Act either the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate
[(or to continue acting as a Director or Consultant) or shall affect the right
of the Company or any Affiliate to terminate the employment of any Employee,
with or without cause, to remove any Director as provided in the Company's By-
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Laws and the provisions of the General Corporation Law of the State of Delaware,
or to terminate the relationship of any Consultant in accordance with the terms
of that Consultant's agreement with the Company or Affiliate to which such
Consultant is providing services.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) (1) The Board or the Committee shall have the authority to effect,
at any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of common stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case an Incentive Stock Option granted to a ten percent (10%) stockholder (as
defined in subsection 5(c)), not less than one hundred and ten percent (110%) of
the Fair Market Value) per share of common stock on the new grant date.
(2) Shares subject to an Option canceled under this subsection
9(e) shall continue to be counted against the maximum award of Options permitted
to be granted pursuant to subsection 5(d) of the Plan. The repricing of an
Option under this subsection 9(e), resulting in a reduction of the exercise
price, shall be deemed to be a cancellation of the original Option and the grant
of a substitute Option; in the event of such repricing, both the original and
the
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substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(d) of the Plan. The provisions
of this subsection 9(e) shall be applicable only to the extent required by
Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(d), and the outstanding Options will be appropriately
adjusted in the class(es) and number of shares and price per share of stock
subject to such outstanding Options. Such adjustments shall be made by the Board
or Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any
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employee benefit plan, or related trust, sponsored or maintained by the Company
or any Affiliate of the Company) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then to the
extent permitted by applicable law and, with respect to Options held by persons
then performing services as Employees, Directors or Consultants, the time during
which such Options may be exercised shall be accelerated prior to such event and
the Options terminated if not exercised after such acceleration and at or prior
to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under
the Plan;
(2) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder
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regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on July 18, 2005, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
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13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
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APPENDIX D
ELEXSYS INTERNATIONAL, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF ELEXSYS INTERNATIONAL, INC.
For the Annual Meeting of Stockholders--January 30, 1996
MILAN MANDARIC and ALAN C. MENDELSON are hereby appointed proxies (each with
power to act alone and with power of substitution) to vote all shares which the
undersigned would be entitled to vote at the 1996 Annual Meeting of Stockholders
of Elexsys International, Inc. (the "Company") at the Four Points Hotel, 100
North Mathilda Avenue, Sunnyvale, California 94089 at 2:00 p.m. local time on
January 30, 1996, and all adjournments thereof, on the matters set forth below,
and in their discretion upon any other matters brought before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4 AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS NO. 1, 2 , 3, AND 4.
1. ELECTION OF DIRECTORS
FOR [ ] Roland G. Matthews, Peter S. Jonas and C. Bradford Jeffries
WITHHOLD AUTHORITY [ ] to vote for all nominees listed above.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name.)
2. To approve the adoption of the 1996 Employee Stock Purchase Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued and to be signed on reverse side)
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3. To approve the adoption of the 1995 Stock Option Plan, as amended and
restated.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To approve the adoption of the 1996 Non-Employee Directors' Stock
Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated , 19
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Signature
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Signature
[ ] I/We Plan to Attend the Meeting.
Please be sure to date this Proxy and
to sign exactly as your name appears
herein; joint owners should each
sign; if by a corporation, sign in
the manner usually employed by it; if
by a fiduciary, the fiduciary's title
should be shown.
PLEASE SIGN, DATE AND MAIL THIS PROXY TODAY. YOUR VOTE IS IMPORTANT.
