<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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
</TABLE>
DH Technology, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of 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 transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
DH TECHNOLOGY, INC.
To All Shareholders:
The 1995 Annual Meeting of the Shareholders of DH Technology, Inc. (the
"Company") will be held at the Sheraton Grand Hotel on Harbor Island, San Diego,
California 92101 on April 19, 1995 at 10:00 a.m., to act on the following
matters:
(1) To elect five persons to the Company's Board of Directors;
(2) To ratify and approve a 250,000 share increase in the Common Stock
issuable under the 1992 Stock Plan;
(3) To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the current fiscal year; and
(4) To act on such other matters as may properly come before the meeting
or any adjournment(s) thereof.
In accordance with the Company's Bylaws, the Board of Directors has fixed
the close of business on February 21, 1995 as the record date for the
determination of shareholders entitled to notice of, and to vote at, this
meeting or any adjournment(s) thereof. The stock transfer books will not be
closed. Your attention is directed to the enclosed Proxy Statement setting forth
information regarding the matters to be acted upon at the meeting. You are
cordially invited to attend the meeting in person.
Dated: March 17, 1995
By Order of the Board of Directors of
DH TECHNOLOGY, INC.
By: Janet W. Shanks, Secretary
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING...................................... 1
General............................................................................. 1
Record Date and Shares Outstanding.................................................. 1
Revocability of Proxies............................................................. 1
Voting and Solicitation............................................................. 1
Quorum; Abstentions; Broker Non-Votes............................................... 1
Deadline for Receipt of Shareholder Proposals for 1996 Annual Meeting............... 2
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS............................................... 2
Nominees and Vote Required.......................................................... 2
Board Meetings and Committees....................................................... 3
Compensation of Directors........................................................... 3
PROPOSAL NO. 2 -- APPROVAL OF A 250,000 SHARE INCREASE IN SHARES ISSUABLE UNDER THE
1992 STOCK PLAN..................................................................... 4
Increase of 250,000 Shares.......................................................... 4
Information Regarding Recent Grants................................................. 5
Vote Required....................................................................... 5
Summary of the 1992 Stock Plan...................................................... 5
Certain Federal Income Tax Considerations........................................... 10
PROPOSAL NO. 3 -- RATIFICATION OF INDEPENDENT ACCOUNTANTS............................. 12
Vote Required....................................................................... 12
EXECUTIVE COMPENSATION................................................................ 13
Executive Compensation Tables....................................................... 13
Employment Agreement and Change-in-Control Arrangements............................. 14
Report of the Compensation Committee................................................ 14
Compensation Committee Interlocks and Insider Participation......................... 16
COMPANY PERFORMANCE -- COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN................ 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 17
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.................. 18
OTHER MATTERS......................................................................... 18
</TABLE>
i
<PAGE> 4
DH TECHNOLOGY, INC.
PROXY STATEMENT FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of DH
Technology, Inc. (the "Company") for use at the Annual Meeting of Shareholders
to be held on April 19, 1995 at 10:00 a.m., local time, or at any adjournment(s)
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the Sheraton
Grand Hotel on Harbor Island, San Diego, California 92101. The Company's
principal offices are located at 15070 Avenue of Science, San Diego, California
92128. The telephone number at that address is (619) 451-3485.
These proxy solicitation materials were mailed on or about March 17, 1995
to all shareholders entitled to vote at the meeting.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on February 21, 1995 are
entitled to notice of and to vote at the meeting. At the record date, 5,156,982
shares of the Company's Common Stock (the "Common Stock") were issued and
outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attn:
Corporate Secretary) a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Every shareholder voting at the meeting for the election of directors may
cumulate such shareholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which the shareholder's shares are entitled, or distribute the shareholder's
votes on the same principle among as many candidates as the shareholder thinks
fit, provided that votes cannot be cast for more than five candidates. However,
no shareholder shall be entitled to cumulate votes unless the candidate's name
has been placed in nomination prior to the voting and the shareholder, or any
other shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate the shareholder's votes. On all other matters, each share
has one vote.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, telefax or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the record
date. Shares that are voted "FOR", "AGAINST" or "ABSTAIN" on a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent
<PAGE> 5
to the contrary, the Company intends to treat abstentions in this manner.
Accordingly, abstentions will have the same effect as a vote against the
proposal.
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a broker non-vote
will not affect the outcome of the voting on a proposal.
An automated system administered by the Company's transfer agent will be
used to tabulate proxies. Tabulated proxies will be transmitted to an employee
of the Company who will serve as inspector of elections.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1996 Annual Meeting of Shareholders must
be received by the Company no later than November 14, 1995 in order to be
eligible for inclusion in the proxy statement and form of proxy relating to that
meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES AND VOTE REQUIRED
A board of five (5) directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five nominees named below, all of whom are presently directors of the
Company. In the event that any such nominee is unable or declines to serve as a
director at the time of the Annual Meeting of Shareholders, the proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner in accordance with cumulative voting as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. The five nominees for director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under California law. It is not expected that any nominee will be unable or will
decline to serve as a director. The term of office of each person elected as a
director will continue until the next Annual Meeting of Shareholders or until a
successor has been elected and qualified.
The names of the nominees, and certain information about them as of the
record date, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- - ----------------------- --- -------------------------------------- --------
<S> <C> <C> <C>
William J. Bowers 66 Private Investor 1990
William H. Gibbs 51 President, Chief Executive Officer and 1985
Chairman of the Board of Directors
of the Company
Bruce G. Klaas 62 Private Investor and Attorney 1983
Don M. Lyle 55 Independent Consultant 1992
George M. Ryan 73 Private Investor 1983
</TABLE>
Mr. Bowers was Chief Executive Officer and Chairman of MSI Data
Corporation, a data collection company, for more than five years prior to 1988.
He retired from that position in 1988 and is now a private investor. Mr. Bowers
is also a director of Quality Systems, Inc.
Mr. Gibbs has been the President and Chief Executive Officer of the Company
since November 1985 and became Chairman of the Board of Directors of the Company
in February 1987. From August 1983 until
2
<PAGE> 6
November 1985, he held various positions, including those of President and Chief
Operating Officer, with Computer and Communications Technology, a supplier of
rigid disc magnetic recording heads to the peripheral equipment segment of the
computer industry.
Mr. Klaas is a private investor and a patent lawyer. He has been of counsel
to the law firm of Klaas, Law, O'Meara and Malkin, P.C., Denver, Colorado, the
Company's patent counsel, since December 1990, when he retired from the active
practice of law. Prior to that date he was a partner in a predecessor law firm,
Klaas & Law, for 15 years.
Mr. Lyle has been an independent consultant since 1983 to a number of
technology-based companies in the United States, Europe and Japan. From 1984
through 1987, Mr. Lyle was President and Chief Executive Officer of Data
Electronics, Inc. Mr. Lyle is also a director of Emulex Network Systems.
Mr. Ryan is a private investor.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
1994. No director attended fewer than 75% of such meetings or of committee
meetings held while such director was a member of the Board or of a committee.
The Board of Directors has a Nominating Committee, an Audit Committee and a
Compensation Committee.
The Nominating Committee recommends new members for the Company's Board of
Directors. The Committee consists of William J. Bowers and William H. Gibbs.
Thus far, the functions of the Nominating Committee have been performed by the
Board of Directors. The Nominating Committee held no meetings in 1994.
The Audit Committee recommends engagement of the Company's independent
accountants, approves services performed by such accountants and reviews and
evaluates the Company's accounting system and its system of internal accounting
controls. This Committee, consisting of George M. Ryan and William J. Bowers,
held one meeting during 1994.
The Compensation Committee reviews and administers the compensation of the
officers of the Company and administers the Company's 1992 Stock Plan and, to
the extent necessary with respect to outstanding options, the Company's 1983
Incentive Stock Option Plan. This Committee, currently consisting of Bruce G.
Klaas and Don M. Lyle, held three meetings during 1994.
COMPENSATION OF DIRECTORS
Retainer and Meeting Fees
All non-employee directors received a $6,000 annual retainer plus $1,250
for each Board of Directors meeting attended and for each committee meeting
which did not occur on a regularly scheduled date.
Director Warrant Plan
The Company's Director Warrant Plan (the "Warrant Plan") was adopted in
December 1985 by the Board of Directors and approved by the shareholders in
April 1986 for the purpose of issuing Common Stock Purchase Warrants (the
"Warrants") to directors of the Company who are otherwise ineligible under the
Company's stock option programs. A total of 150,000 shares of Common Stock is
reserved for issuance under the Warrant Plan. Under the Warrant Plan as
currently in effect, each non-employee director automatically receives a Warrant
to purchase 10,000 shares of the Company's Common Stock upon first becoming a
director (the "Initial Warrant") and each non-employee director automatically
receives an additional Warrant to purchase 3,500 shares each year (the "Annual
Warrant") beginning in the fifth year after the grant of such Initial Warrant.
On August 12, 1994, grants of Annual Warrants to purchase 3,500 shares of the
Company's Common Stock were made to Messrs. Bowers, Klaas and Ryan at an
exercise price of $20.25.
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<PAGE> 7
The exercise price of the Warrants granted under the Warrant Plan is equal
to the fair market value of the Company's Common Stock on the date of the grant.
Each Initial Warrant vests as to 1/48th of the shares subject thereto for each
full calendar month after the date of grant that the holder of such Initial
Warrant remains a member of the Board of Directors. Each Annual Warrant vests
one year after the date of grant, subject to the holder of such Annual Warrant
remaining a member of the Board of Directors during such one-year period.
Initial Warrants and Annual Warrants may be exercised with respect to unvested
shares if a repurchase agreement is executed between the warrantholder and the
Company. The repurchase agreement grants the Company the right to repurchase
unvested shares at the original purchase price in the event the warrantholder
ceases to be a member of the Board of Directors. Warrants may be exercised
within three months after the date the holder ceases to serve as a director and
expire five years after grant. The Warrants are not transferable by their
holders other than by will or laws of descent and may be exercised during the
lifetime of the holder only by the holder. In the event of a change-in-control,
all Warrants outstanding under the Warrant Plan will become fully vested as to
all shares subject to the Warrant. A "change-in-control" is defined to include
the following events:
A. Any of the following that are approved by the requisite vote of the
shareholders of the Company:
(1) a transaction or series of transactions occurring within three years
resulting in more than 50% of the Company's voting stock being
transferred to new shareholders;
(2) a transaction or series of transactions occurring within three years
resulting in more than 50% of the assets of the Company being sold
or disposed of; or
(3) a dissolution or liquidation of the Company, or a partial
liquidation involving more than 50% of its assets;
B. The acquisition of beneficial ownership by any person of more than 50%
of the voting power of the outstanding capital stock of the Company; and
C. A change in the majority of the members of the Board of Directors in a
three-year period for reasons other than death, disability or voluntary
resignation.
PROPOSAL NO. 2
APPROVAL OF A 250,000 SHARE INCREASE IN
SHARES ISSUABLE UNDER THE 1992 STOCK PLAN
The Company is seeking shareholder approval for an amendment to the 1992
Stock Plan. The amendment consists of an increase in the number of shares
issuable under the 1992 Stock Plan.
INCREASE OF 250,000 SHARES
The DH Technology, Inc. 1992 Stock Plan was adopted by the Board of
Directors in February 1992 and approved by the shareholders at the 1992 Annual
Meeting. To date, a total of 732,313 shares have been approved by the
shareholders for issuance under the 1992 Stock Plan. In February 1995, the Board
of Directors approved a further increase of 250,000 shares issuable under the
1992 Stock Plan, which, if approved by the shareholders, would increase the
total shares reserved for issuance under the Plan since its inception to 982,313
shares.
The Board believes this increase is in the best interests of the Company
for two principal reasons. First, the Board believes that the increase is
necessary to enable the Company to continue to compete successfully with other
companies to attract and retain valuable employees. Second, the Board believes
that it is appropriate to have a substantial pool of options available for grant
in connection with acquisitions that the Company may make from time to time. The
ability to make such grants enhances the Company's ability to structure
attractive offers to potential acquisition targets and their key personnel.
4
<PAGE> 8
As of February 21, 1995, options to purchase 326,750 shares of Common Stock
were outstanding under the 1992 Stock Plan, 641,693 shares remained available
for future option grants (subject to shareholder approval of the increase of
250,000 shares), and options to purchase 10,250 shares had been exercised. On
February 21, 1995, the aggregate market value of the unexercised and outstanding
options for shares of Common Stock under the 1992 Stock Plan was $7,760,313,
based on a closing price of $23.75 on the Nasdaq National Market on that date.
INFORMATION REGARDING RECENT GRANTS
The following table sets forth information with respect to the grant of the
options under the 1992 Stock Plan to the Named Executive Officers (as defined in
"Executive Compensation -- Executive Compensation Tables"), to all current
executive officers as a group and to all other employees as a group during 1994:
AMENDED PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF SHARES AGGREGATE
NAME OF INDIVIDUAL OR SUBJECT TO EXERCISE
IDENTITY OF GROUP AND POSITION OPTIONS GRANTED(#) PRICE($)
----------------------------------------------- ------------------ ----------
<S> <C> <C>
William H. Gibbs............................... 100,000 $1,675,000
Bernard V. Masson.............................. 5,000 83,750
David T. Ledwell............................... 5,000 83,750
Richard L. Strautman........................... 2,500 41,875
All current executive officers as a group
(6) persons.................................. 117,500 1,968,125
All other employees as a group................. 64,760 1,084,730
</TABLE>
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the 1992 Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
INCREASE IN THE SHARES ISSUABLE UNDER THE 1992 STOCK PLAN.
SUMMARY OF THE 1992 STOCK PLAN
The 1992 Stock Plan is not a qualified deferred compensation plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
nor is it subject to the Employee Retirement Income Security Act of 1974, as
amended.
Purpose. The purpose of the 1992 Stock Plan is to provide an incentive to
eligible employees, consultants and officers whose present and potential
contributions are important to the continued success of the Company, to afford
these individuals the opportunity to acquire a proprietary interest in the
Company, and to enable the Company to enlist and retain in its employment
qualified personnel for the successful conduct of its business. This purpose is
effected through the granting of (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Stock Purchase Rights, and (iv) Long-Term Performance Awards.
Eligibility. Officers, consultants and other employees of the Company and
its subsidiaries whom the administrators deem to have the potential to
contribute to the success of the Company are eligible to receive awards under
the 1992 Stock Plan. The 1992 Stock Plan provides that Nonstatutory Stock
Options, Stock Appreciation Rights, Stock Purchase Rights and Long-Term
Performance Awards may be granted to employees (including officers) and
consultants of the Company or any parent or subsidiary of the Company. Incentive
Stock Options may be granted only to employees (including officers) of the
Company or any parent or subsidiary of the Company.
Administration. With respect to grants of Stock Options, Stock Purchase
Rights, Stock Appreciation Rights or Long-Term Performance Awards to employees
or consultants who are also officers or directors of the Company, the 1992 Stock
Plan is administered by (i) the Board of Directors of the Company if the Board
of Directors may administer the 1992 Stock Plan in compliance with Rule 16b-3
promulgated under the
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<PAGE> 9
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor rule thereto ("Rule 16b-3") with respect to a plan intended to qualify
thereunder as a discretionary grant or award plan, or (ii) a committee
designated by the Board of Directors to administer the 1992 Stock Plan, which
committee is constituted in such a manner as to permit the plan (a) to comply
with Rule 16b-3 with respect to a plan intended to qualify thereunder as a
discretionary grant or award plan, and (b) to satisfy the legal requirements
relating to the administration of stock option plans under applicable securities
laws, California corporate law and the Internal Revenue Code of 1986, as amended
(the "Code"). With respect to grants of Stock Options, Stock Purchase Rights,
Stock Appreciation Rights or Long-Term Performance Awards to employees or
consultants who are neither officers nor directors of the Company, the 1992
Stock Plan is administered by (i) the Board of Directors, or (ii) a committee
designated by the Board of Directors, which committee is constituted in such a
manner as to satisfy the legal requirements, if any, relating to the
administration of stock option and equity incentive plans under applicable
securities laws, California corporate law and the Code. If permitted by Rule
16b-3, the 1992 Stock Plan may be administered by different bodies with respect
to directors who are employees, officers who are not directors, and employees
who are neither directors nor officers.
The administrators of the 1992 Stock Plan have full power to select, from
among the officers, employees and consultants of the Company eligible for
awards, the individuals to whom awards are granted, to make any combination of
awards to any participant and to determine the specific terms of each grant,
subject to the provisions of the 1992 Stock Plan. The interpretation and
construction of any provision of the 1992 Stock Plan by the administrators shall
be final and conclusive. The 1992 Stock Plan is currently administered by the
Compensation Committee of the Board of Directors. Members of the Board of
Directors receive no additional compensation for their services in connection
with the administration of the 1992 Stock Plan.
Reserved Shares. The total number of shares of Common Stock reserved and
available for distribution under the 1992 Stock Plan is 982,313 shares, subject
to shareholder approval of the increase in shares available under the 1992 Stock
Plan. The Company, during the term of the 1992 Stock Plan, will at all times
reserve and keep available such number of shares as shall be sufficient to
satisfy the requirements of the 1992 Stock Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of shares under the 1992 Stock Plan,
shall relieve the Company of any liability in respect of the non-issuance of
such shares as to which such requisite authority shall not have been obtained.
Stock Options. The 1992 Stock Plan permits the granting of
non-transferable stock options that either qualify as incentive stock options
under Section 422 of the Code ("Incentive Stock Options" or "ISOs") or do not so
qualify ("Nonstatutory Stock Options" or "NSOs").
The term of each option is fixed by the administrators but may not exceed
ten years from the date of grant in the case of ISOs, or five years from the
date of grant in the case of ISOs granted to the owner of Common Stock
possessing, on the date of such grant, more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary. When the
fair market value of shares subject to ISOs first exercisable in one calendar
year is greater than $100,000, the excess options shall be treated as NSOs. For
these purposes, fair market value is determined on the date of grant, and all
ISOs granted by the Company or its subsidiaries to an individual are aggregated.
The administrators determine the time or times each option may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the administrators.
Option Price. The option exercise price for each share covered by an ISO
is not less than 100% of the fair market value of a share of Common Stock on the
date of grant of such option. In the case of ISOs granted to the owner of Common
Stock possessing, on the date of such grant, more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary, the
option exercise price for each share covered by such option is not less than
110% of the fair market value of a share of Common Stock on the date of grant of
such option. The option exercise price for each share covered by an NSO will be
determined by the administrators.
6
<PAGE> 10
Fair Market Value. The fair market value of a share of Common Stock, as
determined by the administrators of the 1992 Stock Plan, shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") National Market (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 administrators deem reliable. Should the Common Stock of the Company be
quoted on the Nasdaq (but not on the National Market thereof) or regularly
quoted by a recognized securities dealer but selling prices are not reported,
the fair market value of a share of Common Stock of the Company shall be the
mean between the high bid and low asked prices for the Common Stock on the last
market trading day prior to the date of determination, as reported in The Wall
Street Journal or such other source as the administrators deem reliable. In the
absence of an established market for the Common Stock, the fair market value
thereof shall be determined in good faith by the administrators.
Consideration. The consideration to be paid for shares issued upon
exercise of options granted under the 1992 Stock Plan, including the method of
payment, shall be determined by the administrators (and, in the case of ISOs,
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other shares of Common Stock which, in the case
of shares acquired upon exercise of an option, have been owned for at least six
months, with a fair market value on the exercise date not greater than the
exercise price, (5) the delivery of a properly executed notice together with
such other documentation as the administrators and any broker approved by the
Company, if applicable, shall require to effect an exercise of the option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (6) any combination of the foregoing methods, or (7) such other
consideration and methods as are permitted by applicable laws.
Grant Limits. The 1992 Stock Plan provides for two limitations on the
number of shares which may be granted to any one participant. First, there is a
$100,000 limit on the total market value of shares subject to all Incentive
Stock Options which are granted by the Company or any parent or subsidiary of
the Company to any employee which are exercisable for the first time in any one
calendar year. Second, no employee may be granted an option to purchase more
than 700,000 shares in any fiscal year. This limit is subject to appropriate
adjustment in the case of stock splits, reverse stock splits and the like. The
purpose of this provision, which is intended to comply with Section 162(m) of
the Internal Revenue Code and the regulations thereunder, is to preserve the
Company's ability to deduct in full any compensation expense related to stock
options and stock appreciation rights.
Miscellaneous Provisions. Under the 1992 Stock Plan, in the event of an
optionee's termination of employment or consulting relationship for any reason
other than death or total and permanent disability, an option may thereafter be
exercised, to the extent it was exercisable at the date of such termination, for
such period of time as the administrators shall determine at the time of grant
(not to exceed five years, or three months in the case of Incentive Stock
Options), but only to the extent that the term of the option has not expired.
However, if an optionee's employment or consulting relationship is terminated as
a result of the optionee's permanent and total disability, the option is
exercisable for such period of time following such termination not exceeding ten
years as is determined by the administrators (not exceeding one year, with such
termination being made at the time of the grant of the option in the case of an
Incentive Stock Option), but only to the extent it was exercisable at the date
of termination and to the extent that the term of the option has not expired. If
an optionee's employment or consulting relationship is terminated by reason of
the optionee's death, the option is exercisable by the optionee's estate or
successor for ten years following death, but only to the extent it was
exercisable at the date of death and to the extent that the term of the option
has not expired.
The administrators of the 1992 Stock Plan may at any time offer on behalf
of the Company to buy out, for a payment in cash or shares of Common Stock of
the Company, an option previously granted, based on such terms and conditions as
the administrators shall establish and communicate to the optionee at the time
that such offer is made; provided however, that buy-out offers made to Insiders
(as defined below) may only be payable in cash. Any such cash offer made to an
officer or director shall comply with all applicable provisions of Rule 16b-3,
if any.
7
<PAGE> 11
All options granted under the 1992 Stock Plan shall be evidenced by a stock
option agreement between the Company and the optionee to whom such option is
granted. Options granted to persons who are subject to Section 16 of the
Exchange Act are subject to any additional restrictions applicable to options
granted to such persons in compliance with Rule 16b-3.
Stock Appreciation Rights. The 1992 Stock Plan also permits the granting of
nontransferable stock appreciation rights ("SARs"). SARs may be granted in
connection with all or any part of an option, either concurrently with the grant
of the option or at any time thereafter during the term of the option. A SAR
granted in connection with an option shall entitle the optionee to exercise the
SAR by surrendering to the Company the unexercised portion of the related
option. The optionee shall receive in exchange from the Company an amount equal
to the excess of the fair market value, on the date of exercise of the SAR, of
the Common Stock covered by the surrendered portion of the related option over
the exercise price of the Common Stock covered by the surrendered portion of the
related option. Notwithstanding the foregoing, the administrators of the 1992
Stock Plan may place limits on the aggregate amount that may be paid upon
exercise of a SAR; provided, however, that such limits shall not restrict the
exercisability of the related option. When a SAR granted in connection with an
option is exercised, the related option, to the extent surrendered, shall cease
to be exercisable. A SAR granted in connection with an option shall be
exercisable until, and shall expire no later than, the date on which the related
option ceases to be exercisable or expires. A SAR granted in connection with an
option may only be exercised at a time when the fair market value of the Common
Stock covered by the related option exceeds the exercise price of the Common
Stock covered by the related option.
SARs may also be granted without related options. In such an event, the SAR
entitles the optionee, by exercising the SAR, to receive from the Company an
amount equal to the excess of the fair market value of the Common Stock covered
by the exercised portion of the SAR as of the date of such exercise, over the
fair market value of the Common Stock covered by the exercised portion of the
SAR, as of the last market trading date prior to the date on which the SAR was
granted. Notwithstanding the foregoing, the administrators of the 1992 Stock
Plan may place limits on the aggregate amount that may be paid upon exercise of
a SAR. A SAR granted without a related option shall be exercisable, in whole or
in part, at such time as the administrators shall specify in the recipient's SAR
agreement.
The Company's obligation arising upon the exercise of a SAR may be paid in
Common Stock or in cash, or any combination thereof, as the administrators may
determine. Shares issued upon the exercise of a SAR shall be valued at their
fair market value as of the date of exercise.
SARs granted to persons who are subject to Section 16 of the Exchange Act
are subject to any additional restrictions applicable to SARs granted to such
persons to qualify under Rule 16b-3. As of the date of this proxy statement, no
SARs have been granted under the 1992 Stock Plan.
Stock Purchase Rights. The 1992 Stock Plan permits the Company to grant
stock purchase rights to purchase Common Stock of the Company ("Stock Purchase
Rights") either alone, in addition to, or in tandem with other awards under the
1992 Stock Plan and/or cash awards made outside the Plan. Upon the granting of a
Stock Purchase Right under the 1992 Stock Plan, the offeree shall be advised in
writing of the terms, conditions and restrictions related to the offer,
including the number of shares of Common Stock that the offeree shall be
entitled to purchase, the price to be paid and the time within which the offeree
must accept such offer (which shall in no event exceed 30 days from the date
upon which the administrators made the determination to grant the Stock Purchase
Right). The offer shall be accepted by execution of a restricted stock purchase
agreement between the Company and the offeree.
Unless the administrators of the 1992 Stock Plan determine otherwise, the
restricted stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason (including
death or permanent and total disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the administrators may determine.
8
<PAGE> 12
Upon exercise of a Stock Purchase Right, the purchaser shall have rights
equivalent to those of a shareholder of the Company. As of the date of this
proxy statement no Stock Purchase Rights had been granted under the 1992 Stock
Plan.
Long-Term Performance Awards. The 1992 Stock Plan also permits the granting
of Long-Term Performance Awards. Such awards shall be based upon Company,
subsidiary and/or individual performance over designated periods based on such
performance factors or other criteria as the administrators deem appropriate.
Performance objectives may vary from participant to participant, group to group,
and period to period. Such awards shall be granted for no cash consideration.
The administrators may adjust Long-Term Performance Awards as they deem
necessary or appropriate in order to avoid windfalls or hardships or to
compensate for changes in tax, accounting or legal rules.
Long-Term Performance Awards will be payable in cash or Common Stock
(including restricted stock). As of the date of this proxy statement, no
Long-Term Incentive Awards have been granted under the 1992 Stock Plan except
for a stock bonus aggregating 3,620 shares (10 shares to each employee) granted
by the Company in 1993.
Nontransferability of Options, Stock Appreciation Rights, Stock Purchase
Rights and Long-Term Performance Awards. Options, SARs, Stock Purchase Rights
and Long-Term Performance Awards granted pursuant to the 1992 Stock Plan are
nontransferable by the participant, other than by will or by the laws of descent
and distribution and may be exercised, during the lifetime of the participant,
only by the participant.
Acceleration of Options, Stock Appreciation Rights, Stock Purchase Rights
and Long-Term Performance Awards. Subject to the 1992 Stock Plan's change in
control provisions (see below), in the event of a sale of substantially all of
the assets of the Company or the merger of the Company with or into another
corporation, each outstanding option, SAR, Stock Purchase Right and Long-Term
Performance Award shall be assumed or substituted by such successor corporation
or a parent or subsidiary of such successor corporation. In the event that the
successor corporation does not agree to such assumption or substitution, the
administrators shall, in lieu of such assumption or substitution, provide for
the participant to have the right to exercise the option, SAR, Stock Purchase
Right or Long-Term Performance Award as to all or a portion of the shares
subject to such option, SAR, Stock Purchase Right or Long-Term Performance Award
including shares as to which the option, SAR, Stock Purchase Right or Long-Term
Performance Award would not otherwise be exercisable. If the administrators make
options, SARs, Stock Purchase Rights and Long-Term Performance Awards fully
exercisable in lieu of assumption or substitution, the administrators shall
notify the participant that the option, SAR, Stock Purchase Right or Long-Term
Performance Award shall be exercisable for a period of 15 days from the date of
such notice and the option, SAR, Stock Purchase Right or Long-Term Performance
Award will terminate upon the expiration of such period.
Change in Control Provisions. The 1992 Stock Plan provides that in the
event of a "Change in Control" of the Company (as defined below) the following
acceleration and valuation provisions shall apply, except as otherwise
determined by the Board of Directors in its discretion prior to the Change in
Control: (i) all stock options, SARs, Stock Purchase Rights and Long-Term
Performance Awards granted under the 1992 Stock Plan, outstanding on the date
such Change in Control is determined to have occurred, that are not yet
exercisable and vested on such date, will become immediately vested and fully
exercisable; (ii) to the extent they are exercisable and vested, all outstanding
options, SARs, Stock Purchase Rights and Long-Term Performance Awards will be
cashed out at the "Change in Control Price" (as defined below) reduced by the
exercise price, if any, applicable to such options, SARs, Stock Purchase Rights
or Long-Term Performance Awards. A "Change in Control" means the occurrence of
(i) the acquisition, directly or indirectly, by a person or entity (other than
the Company, one of its subsidiaries, or a Company employee benefit plan or
trustee thereof) of securities representing 50% or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally in
the election of directors, or (ii) shareholder approval of the Company's merger
or consolidation with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent of the total voting power represented
by the voting securities of the Company or such
9
<PAGE> 13
surviving entity outstanding immediately after such merger or consolidation, or
shareholder approval of an agreement for the sale or disposition of all or
substantially all of the Company's assets, or (iii) a change in the composition
of the Board of Directors of the Company, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (a) are directors of the Company as of the date the
Plan is approved by the shareholders, or (b) are elected, or nominated for
election, to the Board of Directors of the Company with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company), or a transaction requiring the approval
of the shareholders and involving the sale of all or substantially all of the
assets of the Company or a merger of the Company with or into another
corporation. The "Change in Control Price" shall be, as determined by the Board
of Directors, (i) the highest closing sale price of a share of Common Stock as
reported on any established stock exchange as appearing in The Wall Street
Journal at any time within the 60-day period immediately preceding the date of
determination of the Change in Control Price by the Board of Directors, (ii) the
highest price paid or offered per share of Common Stock, as determined by the
Board, in any bona fide transaction or bona fide offer related to the Change in
Control of the Company at any time within such 60-day period, or (iii) some
lower price, as the Board, in its discretion, determines to be a reasonable
estimate of the fair market value of a share of Common Stock.
Adjustment Upon Changes in Capitalization. Subject to any required action
by the shareholders of the Company, in the event any change, such as a stock
split or dividend, is made in the Company's capitalization which results in an
increase or decrease in the number of outstanding shares of Common Stock without
receipt of consideration by the Company, an appropriate adjustment shall be made
in the number of shares which have been reserved for issuance under the 1992
Stock Plan and the price per share covered by each outstanding option, SAR,
Stock Purchase Right and Long-Term Performance Award. In the event of the
proposed dissolution or liquidation of the Company, all outstanding options,
SARs, Stock Purchase Rights, Long-Term Performance Awards and Stock Bonus Awards
will terminate immediately prior to the consummation of such proposed action.
However, the Board of Directors may, in its discretion, make provision for
accelerating the exercisability of shares subject to options, SARs, Stock
Purchase Rights and Long-Term Performance Awards under the 1992 Stock Plan in
such event.
Amendment and Termination. The Board of Directors may amend, alter, suspend
or discontinue the 1992 Stock Plan at any time, but such amendment, alteration,
suspension or discontinuation shall not adversely affect any option, SAR, Stock
Purchase Right or Long-Term Performance Award then outstanding under the 1992
Stock Plan, without the written consent of the participant. To the extent
necessary and desirable to comply with Rule 16b-3 or Section 422 of the Code (or
any other applicable law or regulation), the Company shall obtain shareholder
approval of any amendment to the 1992 Stock Plan in such a manner and to such a
degree as required. Subject to applicable laws and the specific terms of the
1992 Stock Plan, the administrators may accelerate any option, right or award or
waive any condition or restriction pertaining to such option, right or award at
any time. The administrators may also substitute new options, rights or awards
for previously granted options, rights or awards, including previously granted
options, rights or awards having higher option, right or award prices and may
reduce the exercise price of any option, right or award to the then current fair
market value if the fair market value of the Common Stock covered by such
option, right or award shall have declined since the date the option, right or
award was granted.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of the federal income tax consequences of
transactions under the 1992 Stock Plan based on federal securities and income
tax laws in effect on January 1, 1995. This summary is not intended to be
exhaustive and does not discuss the tax consequences of a participant's death or
provisions of the income tax laws of any municipality, state or foreign country
in which an optionee may reside.
Options granted under the 1992 Stock Plan may be either Incentive Stock
Options, as defined in Section 422 of the Code, or Nonstatutory Stock Options.
10
<PAGE> 14
Incentive Stock Options. No taxable income is recognized by the optionee
upon grant or exercise of an Incentive Stock Option unless the alternative
minimum tax rules apply. If Common Stock is issued to an optionee pursuant to
the exercise of an Incentive Stock Option, and if no disqualifying disposition
of such shares is made by such optionee within two years after the date of grant
or within one year after the transfer of such shares to such optionee, then (a)
upon sale of such shares, any amount realized in excess of the option exercise
price will be treated as a long-term capital gain and any loss sustained will be
a long-term capital loss, and (b) no deduction will be allowed to the Company
for federal income tax purposes. The exercise of an incentive stock option may
result in alternative minimum tax liability for the optionee.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of before the expiration of either holding period described above,
generally (a) the optionee will recognize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of the shares at exercise (or, if less, the amount realized on the disposition
of the shares) over the option exercise price paid for such shares, and (b) the
Company is entitled to a tax deduction in the same amount. Any further gain (or
loss) realized by the participant will be taxed as short-term or long-term
capital gain (or loss), as the case may be, and will not result in any deduction
by the Company. Different rules may apply if shares are purchased by an optionee
who is also an officer, director or more than 10% shareholder. See discussion
below of "Special Rules Applicable to Corporate Insiders and Restricted Stock
Purchasers."
Nonstatutory Stock Options. Except as noted below, with respect to
Nonstatutory Stock Options, (a) no income is recognized by the optionee at the
time the option is granted; (b) generally, at exercise, ordinary income is
recognized by the optionee in an amount equal to the difference between the
option exercise price paid for the shares and the fair market value of the
shares on the date of exercise, and the Company is entitled to a tax deduction
in the same amount; and (c) at disposition, any gain (or loss) is treated as
capital gain (or loss). In the case of an optionee who is also an employee, any
income recognized upon exercise of a Nonstatutory Stock Option will constitute
wages for which withholding will be required. However, different rules may apply
if restricted stock is purchased or if shares are purchased by an optionee who
is also an officer, director or more than 10% shareholder. See discussion below
of "Special Rules Applicable to Corporate Insiders and Restricted Stock
Purchasers."
Stock Appreciation Rights. No income will be recognized by a recipient in
connection with the grant of a SAR. When the SAR is exercised, the recipient
will generally be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any Common Stock received on the exercise. In the case of a recipient
who is also an employee, any income recognized upon exercise of a SAR will
constitute wages for which withholding will be required. The Company will be
entitled to a tax deduction in the same amount. If the optionee receives Common
Stock upon the exercise of a SAR, any gain or loss on the sale of such stock
will be treated in the same manner as discussed above under "Nonstatutory Stock
Options." See also "Special Rules Applicable to Corporate Insiders and
Restricted Stock Purchasers."
Stock Purchase Rights. Stock Purchase Rights will generally be taxed in the
same manner as Nonstatutory Options. However, restricted stock is usually
purchased upon exercise of a Stock Purchase Right. At the time of purchase,
restricted stock is subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code. As a result, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will recognize
ordinary income on the dates when the stock ceases to be subject to substantial
risk of forfeiture. The stock will generally cease to be subject to a
substantial risk of forfeiture when it is no longer subject to the Company's
right to repurchase the stock upon the purchaser's termination of employment
with the Company (i.e., as it "vests"). At such times, the purchaser will
recognize the ordinary income measured as the difference between the purchase
price and the fair market value of the stock on the date the stock is no longer
subject to a substantial risk of forfeiture. However, a purchaser may accelerate
to the date of purchase his or her recognition of ordinary income, if any, and
the beginning of any capital gain holding period by timely filing an election
pursuant to Section 83(b) of the Code. In such event, the ordinary income
recognized, if any, would be equal to the difference between the purchase price
and the fair market value of the stock on the date of purchase, and the capital
gain holding period would commence on the purchase date. The ordinary income
recognized by a purchaser who is an employee will be treated as
11
<PAGE> 15
wages and will be subject to tax withholding by the Company. Generally, the
Company will be entitled to a tax deduction in the amount and at the time the
purchaser recognizes ordinary income.
Long-Term Performance Awards. Generally, no income will be recognized by a
recipient in connection with the grant of a Long-Term Performance Award, unless
an election under Section 83(b) of the Code is filed with the Internal Revenue
Service within 30 days of the date of grant. Otherwise, at the time the Long-
Term Performance Award vests, the recipient will generally recognize
compensation income in an amount equal to the fair market value of the award at
the time of vesting. Generally, the recipient will be subject to the tax
consequences discussed under "Nonstatutory Stock Options." In the case of a
recipient who is also an employee, any amount included in income will be subject
to withholding by the Company. The Company will be entitled to a tax deduction
in the amount and at the time the recipient recognizes ordinary income with
respect to a Long-Term Performance Award.
Special Rules Applicable to Corporate Insiders and Restricted Stock
Purchasers. Generally, individuals subject to Section 16(b) of the Exchange Act
("Insiders") and individuals who purchase restricted stock may have their
recognition of compensation income and the beginning of their capital gains
holding period deferred for up to six months after option exercise (for
Insiders), or until the restrictions lapse (for restricted stock purchasers)
(the "Deferral Date"), with the excess of the fair market value of the stock
determined as of the Deferral Date over the purchase price being taxed as
ordinary income, and the tax holding period for any subsequent gain (or loss)
beginning on the Deferral Date. However, an Insider or restricted stock
purchaser who so elects under Code Section 83(b) on a timely basis may instead
be taxed on the difference between the excess of the fair market value on the
date of transfer over the purchase price, with the tax holding period beginning
on such date. Similar rules apply for alternative minimum tax purposes with
respect to the exercise of an Incentive Stock Option by an Insider.
Capital Gain. Generally, net capital gain (net long-term capital gain
minus net short-term capital loss) is taxed at a maximum rate of 28%. Capital
losses are allowed in full against capital gains plus up to $3,000 of ordinary
income.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to the
ratification by the shareholders, the Board of Directors appointed KPMG Peat
Marwick LLP, independent public accountants, to serve for the fiscal year ending
December 31, 1995.
The Board of Directors recommends that the shareholders vote for
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants to audit the financial statements for the Company for
the year ending December 31, 1995. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
ratify KPMG Peat Marwick LLP as the Company's independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
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<PAGE> 16
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLES
The following table shows the total compensation of (i) the Chief Executive
Officer and (ii) all other executive officers of the Company who earned over
$100,000 in salary and bonus in 1994 (together the "Named Executive Officers"),
as well as the total compensation paid to each such individual for the Company's
two previous fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- ----------------------- PAYOUTS
OTHER RESTRICTED SECURITIES -------
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(1)
- - ------------------------------ ---- -------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Gibbs 1994 $257,986 $138,000 -- -- 100,000 -- $1,357
Chief Executive Officer 1993 242,500 112,236 -- -- 75,000 -- 1,935
1992 230,000 101,595 -- -- 150,000 -- 1,727
Bernard V. Masson 1994 124,355 26,000 -- -- 5,000 -- 1,130
Vice President & General 1993 116,000 28,000 -- -- 60,000 -- 712
Manager of DHPrint 1992 50,580 12,845 -- -- -- -- --
David T. Ledwell 1994 115,283 31,000 -- -- 5,000 -- 982
Vice President & General 1993 109,500 29,000 -- -- 5,000 -- 1,407
Manager of DHTech 1992 102,552 23,433 -- -- 12,500 -- 1,199
Richard L. Strautman 1994 96,780 18,000 -- -- 2,500 -- 1,025
Vice President of 1993 92,112 17,000 -- -- -- -- 1,189
Marketing 1992 87,366 17,234 -- -- -- -- 981
</TABLE>
- - ---------------
(1) Represents payments of insurance premiums on behalf of the Named Executive
Officers as well as, in 1993, a 10 share stock bonus granted to all
employees.
The following tables set forth certain information for the Named Executive
Officers with respect to grants and exercises in 1994 of options to purchase
Common Stock of the Company:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED APPRECIATION FOR OPTION
UNDERLYING TO EMPLOYEES EXERCISE OR TERM(3)
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME (#) YEAR(2) ($/SH) DATE 5%($) 10%($)
- - ---------------------- --------------- ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William H. Gibbs...... 100,000 54.9% $16.75 03/04/2002 $800,000 $1,916,000
Bernard V. Masson..... 5,000 2.7% 16.75 03/04/2002 40,000 95,800
David T. Ledwell...... 5,000 2.7% 16.75 03/04/2002 40,000 95,800
Richard L.
Strautman........... 2,500 1.4% 16.75 03/04/2002 20,000 47,900
</TABLE>
- - ---------------
(1) These options were granted pursuant to the 1992 Stock Plan. All options have
eight year terms and vest at the rate of 25% of the total shares on each of
the first four anniversaries of the date of grant, except for options
granted to Mr. Gibbs which vest generally, at a rate of 1/48 of the total
shares each month from the date of grant. See also "Employment Agreement and
Change in Control Arrangements" and "Acceleration of Options, Stock
Appreciation Rights, Stock Purchase Rights and Long-Term Performance Awards"
and "Change in Control Provisions" under Proposal No. 2.
(2) An aggregate of 182,250 options to purchase shares of Common Stock were
granted to employees during 1994.
(3) Potential realizable value is based on an assumption that the stock price of
Common Stock appreciates at the annual rate shown (compounded annually) from
the date of grant until the end of the eight year
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<PAGE> 17
option term. One share of stock purchased at $16.75 in 1994 would yield
profits of $8.00 per share at 5% appreciation over eight years, or $19.16
per share at 10% appreciation over the same period. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES VALUE YEAR END(#) AT FISCAL YEAR END(1)($)
ACQUIRED ON REALIZED --------------------------------- ---------------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------- ----------- -------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William H. Gibbs..... 40,000 $470,000 202,500 162,500 $2,701,250 $1,625,000
Bernard V. Masson.... 9,000 66,938 6,000 50,000 73,500 587,500
David T. Ledwell..... 7,500 133,125 15,000 15,000 228,438 165,000
Richard L.
Strautman.......... -- -- 5,000 7,500 71,875 90,000
</TABLE>
- - ---------------
(1) Market value of underlying securities at year-end minus the exercise price
multiplied by the number of shares.
EMPLOYMENT AGREEMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has an employment agreement with William H. Gibbs under which
the Company has a continuing obligation to employ Mr. Gibbs. The employment
agreement provides that Mr. Gibbs will receive a base salary determined annually
by the Board of Directors, such salary in any event not to be less than $12,500
per month. Mr. Gibbs is also entitled to bonuses of up to 50% of his annual base
salary based upon performance of the Company as set forth in the annual
operating plan agreed to by the Board of Directors and Mr. Gibbs. In the event
that Mr. Gibbs is terminated without cause, the Company is obligated to continue
to pay Mr. Gibbs' salary until the earlier of (i) commencement of employment
with a new employer or (ii) six months from the date of termination. In the
event of termination due to resignation, for cause, disability or death, no
severance pay will be due, but the Company will continue to pay for medical
benefits in certain situations for periods not exceeding two years. In the event
of a change-in-control, Mr. Gibbs may resign and have his resignation treated as
a termination without cause. A change-in-control, for purposes of Mr. Gibbs'
employment agreement, is defined to be (i) a merger or consolidation which has
the result that voting securities of the Company are canceled, converted for
cash or cash equivalents, securities of another entity or non-voting securities
of the Company, (ii) a sale of the Company's assets, or (iii) securities
representing more than 50% of the voting power of the Company are acquired by a
person or entity.
Vesting of all options held by officers under the 1992 Stock Plan of the
Company is subject to the acceleration provisions thereof in the event of a
change in control. See "Change in Control Provisions" under Proposal No. 2.
Vesting of all options held by officers under the 1983 Incentive Stock Option
Plan of the Company is subject to the acceleration provisions thereof in the
event of a merger or consolidation.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors establishes the
compensation plans and policies and the specific compensation levels for
executive officers, and administers the 1992 Stock Plan and the 1983 Incentive
Stock Option Plan.
Compensation Policies
There are three major elements of the Company's executive compensation
program: base salaries, incentive bonuses and long-term stock options.
The Compensation Committee establishes the salaries of executive officers
primarily by reference to data contained in the American Electronics Association
(AEA) survey of executive compensation in the
14
<PAGE> 18
electronics industry. The Committee establishes base salaries that are within
the range of salaries for persons holding positions of similar responsibility at
comparably-sized technology companies. In addition, the Committee considers
factors such as relative Company performance, the individual's past performance,
his or her future potential and the individual's experience and ability as
judged by the Committee. Effective July 1, 1994, the Compensation Committee
approved base salary increases averaging approximately 6% for executive
officers.
Annual bonuses for executive officers are primarily based on the
achievement of performance targets set forth in the Company's operating plan for
the year. The annual cash bonus for executives other than the Chief Executive
Officer, William H. Gibbs, is based on four elements: (i) pretax profits in
relation to the Company's operating plan; (ii) the operating results of the
businesses or functions reporting to the executive, (iii) achievement of
specific, measurable objectives related to the executive's area of
responsibilities, and (iv) a factor based on Mr. Gibbs' subjective judgment of
the executive's performance. Bonus payments to executive officers other than Mr.
Gibbs averaged approximately 21.4% of such officers' base salaries for 1994. The
Committee believes this to be commensurate with overall performance against the
objectives utilized in the executive bonus program.
The Compensation Committee believes that stock options are an effective
long-term compensation device in that they serve to align the interests of the
executive officers with those of the shareholders and motivate officers to
remain in the Company's employ. In determining stock option grants in 1994, the
Committee considered ranges of options granted to executives at various levels
in other companies and the relationship of such grants to the number of vested
options then held. While this data was somewhat imprecise, the Compensation
Committee felt comfortable that the ranges were reasonable. With this data in
mind, the number of options granted to specific executive officers was
determined by the subjective evaluation of Mr. Gibbs and the Committee of the
executive's ability to influence the Company's long-term growth and
profitability. All options are granted at the market price of the Common Stock
on the date of grant. During 1994, the Compensation Committee granted options to
purchase an aggregate of 17,500 shares of Common Stock to executive officers
other than Mr. Gibbs.
Compensation of Chief Executive Officer
The Company has an employment agreement with Mr. Gibbs which provides that
he will receive a base salary determined annually by the Board of Directors, in
any event not to be less than $12,500 per month. The Compensation Committee
believes that his total compensation (salary and bonus) should be heavily
influenced by the performance of the Company. In establishing his base salary,
the Committee also considers the salaries of chief executive officers of
comparable companies and their performance, according to the AEA data referred
to above. Effective July 1, 1994, Mr. Gibbs' salary was increased by 6.6% to
$266,500 per annum.
Mr. Gibbs is also entitled to an annual cash bonus, which for more than
three years has been established as a direct function of the Company's pretax
operating profit in relation to the approved operating plan for the fiscal year.
Mr. Gibbs is entitled to a bonus of 50% of his annual base salary if the Company
meets its fiscal year profitability objective. The bonus can be higher if the
Company exceeds its profitability objective, and lower if such objective is not
achieved. In 1994, the Company achieved pretax operating profit that was
approximately 108% of the Company's operating plan. Mr. Gibbs received a bonus
of $138,000 for 1994, representing approximately 104% of his bonus target and
approximately 52% of his base salary.
Mr. Gibbs was granted options to purchase 100,000 shares in 1994. This
amount was determined in the same manner as for the other executive officers,
except that Mr. Gibbs did not participate in the determination of his option
award. The Committee's subjective judgment of Mr. Gibbs' performance and of his
overall value to the Company were very significant factors in the determination
of his option grant.
Deductibility of Executive Compensation
As a result of legislation adopted in 1993, the Internal Revenue Code now
limits the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of the other four most highly
compensated executive officers. For this purpose, compensation can include, in
addition to cash
15
<PAGE> 19
compensation, the difference between the exercise price of stock options and the
value of the underlying stock on the date of exercise. Under this legislation,
the Company may deduct compensation with respect to any of these individuals
only to the extent that during any fiscal year such compensation does not exceed
$1 million or meets certain other conditions (such as shareholder approval).
Based on the Company's current compensation plans and policies and proposed
regulations interpreting the new legislation, the Company and the Committee
believe that, for the near future, there is little risk that the Company will
lose any significant tax deduction for executive compensation.
Don M. Lyle, Member Bruce G. Klaas, Member
of the Compensation Committee of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Don M. Lyle and Bruce G. Klaas
who are non-employee directors with no interlocking relationships as defined by
the Securities and Exchange Commission.
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for the Company, the Nasdaq CRSP Total Return Index and the Nasdaq
Computer Manufacturing Stock Index (both Nasdaq indices were prepared by the
Center for Research in Securities Prices at the University of Chicago):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ COMP. NASDAQ TOTAL
(FISCAL YEAR COVERED) DHT MFG RETURN
<S> <C> <C> <C>
1989 100 100 100
1990 57.26 106.54 85.02
1991 71.79 149.05 135.71
1992 104.27 200.36 157.36
1993 120.51 189.88 181.15
1994 164.10 208.64 175.25
</TABLE>
ASSUMES $100 INVESTED ON DECEMBER 31, 1989
TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
16
<PAGE> 20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Common
Stock owned on February 21, 1995 (except as otherwise specified) by (i) each
person who is known by the Company to own beneficially more than five percent of
the Company's Common Stock, (ii) each of the Company's directors, (iii) Named
Executive Officers and (iv) all directors and officers as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below have sole investment and voting power with respect to
such shares, subject to community property laws.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNERSHIP(1) OWNER
------------------------------------------------ ----------------- ----------
<S> <C> <C>
Neuberger & Berman(2)........................... 622,660(3) 12.1%
605 Third Avenue
New York, New York 10158-3698
Entities affiliated with Brinson Holdings,
Inc.(2)....................................... 404,442(4) 7.8%
209 South LaSalle
Chicago, Illinois 60604-1295
Entities affiliated with The Travelers,
Inc.(2)....................................... 323,838(5) 6.3%
65 East 55th Street
New York, New York 10022
Entities affiliated with T. Rowe Price
Associates, Inc.(2)........................... 318,000(6) 6.2%
100 East Pratt Street
Baltimore, Maryland 21202
PNC Bank, N.A. and affiliated entities(2)....... 299,200(7) 5.8%
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
Wellington Management Company(2)................ 259,500(8) 5.0%
75 State Street
Boston, Massachusetts 02109
William H. Gibbs................................ 299,786(9) 5.5%
William J. Bowers............................... -- --
Bruce G. Klaas.................................. 15,500(9) *
George M. Ryan.................................. 12,000(9) *
Don M. Lyle..................................... 7,500(9) *
David T. Ledwell................................ 25,635(9) *
Bernard V. Masson............................... 22,260(9) *
Richard L. Strautman............................ 5,635(9) *
All officers and directors as a group (10
persons)...................................... 391,076(10) 7.2%
</TABLE>
- - ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
are deemed to be beneficially owned by the person holding such option or
warrant for computing the percentage ownership of such person, but are not
treated as outstanding for computing the percentage of any other person.
(2) Information is as of December 31, 1994, and is based on Schedule 13Gs filed
with the Securities and Exchange Commission by the respective entities.
(3) These shares are owned by clients of Neuberger and Berman ("N & B"), a
registered investment advisor and broker/dealer. N & B shares voting power
as to 174,400 shares and dispositive power as to 622,660 shares.
(4) Includes 168,200 shares beneficially held by Brinson Partners, Inc.
("BPI"), a wholly-owned subsidiary of Brinson Holdings, Inc. ("BHI") and
236,242 shares held by Brinson Trust Company ("BTC"), a wholly-owned
subsidiary of BPI. BPI and BTC have sole voting and dispositive power over
the shares which each entity beneficially owns.
17
<PAGE> 21
(5) Reflects shares beneficially owned by The Travelers, Inc. ("TRV"), Smith
Barney Holdings Inc. ("SB Holdings"), a wholly-owned subsidiary of TRV and
Smith Barney Inc. ("SB"), a wholly-owned subsidiary of SB Holdings. TRV, SB
Holdings and SB share voting and dispositive power over the securities. TRV
and SB Holdings disclaim beneficial ownership of such securities.
(6) These securities are owned by various individual and institutional
investors (including T. Rowe Price Small Cap Value Fund, Inc. which owns
280,000 shares, representing 5.4% of the shares outstanding), which T. Rowe
Price Associates, Inc. ("Price Associates") serves as investment advisor
with power to direct investments and/or shared power to vote the
securities. Price Associates has sole voting power over 8,000 shares and
sole dispositive power over 318,000 shares. For the purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be the beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact,
beneficial owner of such securities.
(7) PNC Bank, National Association ("PNC Bank") is a national banking
association and a wholly-owned indirect subsidiary of PNC Bank Corp., a
bank holding company organized under the laws of the Commonwealth of
Pennyslvania. These shares are held in common trust funds and mutual funds
in which PNC Bank or its subsidiaries serve as trustee or investment
advisor. PNC Bank has sole voting and dispositive power as to such shares.
(8) These shares are owned by clients of Wellington Management Company ("WMC"),
in its capacity as an investment advisor. WMC shares voting power as to
103,200 shares and dispositive power as to 259,500 shares.
(9) Includes the following numbers of shares issuable upon exercise of options
or warrants that are currently exercisable or exercisable within 60 days of
February 21, 1995; William H. Gibbs: 229,584; Bruce G. Klaas: 12,000;
George M. Ryan: 12,000; Don M. Lyle: 7,500; David T. Ledwell: 20,625;
Bernard V. Masson: 22,250; and Richard Strautman: 5,625.
(10) Includes 312,334 shares issuable upon exercise of options or warrants that
are currently exercisable or exercisable within 60 days of February 21,
1995.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the Securities and Exchange Commission (the
"SEC") and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent shareholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during the fiscal year ended December 31, 1994: (i) a delayed Form 3 filing
was made by Endre D. Vargha, (ii) a delayed Form 5 filing was made by Bruce G.
Klaas and (iii) William J. Bowers did not timely report on Form 4 the sale of
800 shares of Common Stock, although he did report such transaction on Form 5.
Other than these delayed filings, again based solely on its review of copies of
such forms received by it or written representations from certain reporting
persons, the Company believes that all other filing requirements applicable to
its officers, directors and ten percent shareholders were fulfilled.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your stock be represented at the meeting, regardless
of the number of shares that you hold. You are, therefore, urged to execute and
return the accompanying proxy in the envelope that has been enclosed, at your
earliest convenience.
The Board of Directors
By: Janet W. Shanks, Secretary
Dated: March 17, 1995
18
<PAGE> 22
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DH TECHNOLOGY, INC.
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints William H. Gibbs and Janet W. Shanks,
or either of them, as proxyholders, each with the power to appoint his or her
substitutes, and hereby authorizes them to represent and to vote, as designated
on the reverse side of this proxy card, all the shares of common stock of DH
Technology, Inc. held on record by the undersigned on February 21, 1995, at the
1995 Annual Meeting of Shareholders of DH Technology, Inc. to be held on April
19, 1995, at 10:00 a.m. local time at the Sheraton Grand Hotel on Harbor
Island, San Diego, California 92101, or at any adjournment thereof.
(To be Signed on Reverse Side)
Please mark your
[X] votes as in this
example.
FOR WITHHELD Nominees: William J. Bowers
1. Election of [ ] [ ] William H. Gibbs
Officers Bruce G. Klaas
Don M. Lyle
George M. Ryan
For all nominees (except as indicated below):
- - ---------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to increase by 250,000 the number
of shares issuable under the 1992 Stock plan. [ ] [ ] [ ]
3. Proposal to approve the appointment of
KPMG PEAT MARWICK LLP as independent [ ] [ ] [ ]
accountants of the corporation.
4. In their discretion the proxyholders are authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s)
thereof.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for Proposals 1, 2, and 3 and as said proxyholders deem advisable on such
other matters as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURES _______________ DATE _____ SIGNATURES _______________ DATE _____
Note: Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give fill title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
<PAGE> 23
DH TECHNOLOGY, INC.
1992 STOCK PLAN
1. Purpose of the Plan. The purpose of the DH Technology, Inc.
1992 Stock Plan is to enable DH Technology, Inc. to provide an incentive to
eligible employees, consultants and officers whose present and potential
contributions are important to the continued success of the Company, to afford
these individuals the opportunity to acquire a proprietary interest in the
Company, and to enable the Company to enlist and retain in its employment
qualified personnel for the successful conduct of its business. It is intended
that this purpose will be effected through the granting of (a) stock options,
(b) stock purchase rights, (c) stock appreciation rights, and (d) long-term
performance awards.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Administrator" means the Board or such of its
Committees as shall be administering the Plan, in accordance with Section 5 of
the Plan.
(b) "Applicable Laws" means the legal requirements
relating to the administration of stock option plans under applicable
securities laws, California corporate law and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board
in accordance with Section 5 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means DH Technology, Inc., a California
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render 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.
(i) "Continuous Status as an Employee or Consultant"
means that the employment or consulting relationship is not interrupted or
terminated by the Company, any Parent or Subsidiary. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of: (i)
any leave of absence
<PAGE> 24
approved by the Board, including sick leave, military leave, or any other
personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; or (ii) transfers between locations of the
Company or between the Company, its Parent, its Subsidiaries or its successor.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary 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.
(m) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(n) "Fair Market Value" means, as of any date, the value
of Common Stock 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
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 Administrator 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 high bid
and low 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 Administrator 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 Administrator.
-2-
<PAGE> 25
(o) "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.
(p) "Long-Term Performance Award" means an award under
Section 9 below. A Long-Term Performance Award shall permit the recipient to
receive a cash or stock bonus (as determined by the Administrator) upon
satisfaction of such performance factors as are set out in the recipient's
individual grant. Long-term Performance Awards will be based upon the
achievement of Company, Subsidiary and/or individual performance factors or
upon such other criteria as the Administrator may deem appropriate.
(q) "Long-Term Performance Award Agreement" means a
written agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Long-Term Performance Award grant. The Long-Term
Performance Award Agreement is subject to the terms and conditions of the Plan.
(r) "Nonstatutory Stock Option" means any Option that is
not an Incentive Stock Option.
(s) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option, Stock Purchase Right, SAR
or Long-Term Performance Award grant. The Notice of Grant is part of the
Option Agreement, the SAR Agreement and the Long-Term Performance Award
Agreement.
(t) "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.
(u) "Option" means a stock option granted pursuant to the
Plan.
(v) "Option Agreement" means a written agreement between
the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(w) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(x) "Optioned Stock" means the Common Stock subject to an
Option or Right.
(y) "Optionee" means an Employee or Consultant who holds
an outstanding Option or Right.
-3-
<PAGE> 26
(z) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(aa) "Plan" means this 1992 Stock Plan.
(bb) "Restricted Stock" means shares of Common Stock
subject to a Restricted Stock Purchase Agreement acquired pursuant to a grant
of Stock Purchase Rights under Section 8 below.
(cc) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(dd) "Right" means and includes SARs, Long-Term
Performance Awards and Stock Purchase Rights granted pursuant to the Plan.
(ee) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
any successor rule thereto, as in effect when discretion is being exercised
with respect to the Plan.
(ff) "SAR" means a stock appreciation right granted
pursuant to Section 7 of the Plan.
(gg) "SAR Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
SAR grant. The SAR Agreement is subject to the terms and conditions of the
Plan.
(hh) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(ii) "Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 8 of the Plan, as evidenced by a Notice of
Grant.
(jj) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Eligibility. Nonstatutory Stock Options and Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has
been granted an Option or Right may be granted additional Options or Rights.
-4-
<PAGE> 27
4. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the total number of Shares reserved and available for
distribution under the Plan is 982,313 Shares. Subject to Section 11 of the
Plan, if any Shares that have been optioned under an Option cease to be subject
to such Option (other than through exercise of the Option), or if any Option or
Right granted hereunder is forfeited or any such award otherwise terminates
prior to the issuance of Common Stock to the participant, the shares that were
subject to such Option or Right shall again be available for distribution in
connection with future Option or right grants under the Plan; provided,
however, that Shares that have actually been issued under the Plan, whether
upon exercise of an Option or Right, shall not in any event be returned to the
Plan and shall not become available for future distribution under the Plan.
5. Administration.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted
by Rule 16b-3 and Applicable Laws, the Plan may (but need not) be administered
by different administrative bodies with respect to (A) Directors who are
employees, (B) Officers who are not Directors and (C) Employees who are neither
Directors nor Officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options and Rights to eligible
participants who are Officers or Directors of the Company, the Plan shall be
administered by (A) the Board, if the Board may administer the Plan in
compliance with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary grant or award plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted (1) in such a manner as to permit the Plan to comply with Rule
16b-3 as it applies to a plan intended to qualify thereunder as a discretionary
grant or award plan and (2) in such a manner as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons.
With respect to grants of Options to eligible participants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 5(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of any Committee and
appoint additional members
-5-
<PAGE> 28
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members
of a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee appointed
under subsection (ii), to the extent permitted by Rule 16b-3 as it applies to a
plan intended to qualify thereunder as a discretionary grant or award plan.
(b) Powers of the Administrator. Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to
whom Options and Rights may be granted hereunder;
(iii) to determine whether and to what extent
Options and Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each Option and Right granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Right
or the shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the
Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(ix) to determine whether and under what
circumstances an Option or Right may be settled in cash instead of Common Stock
or Common Stock instead of cash;
-6-
<PAGE> 29
(x) to reduce the exercise price of any Option or
Right;
(xi) to modify or amend each Option or Right
(subject to Section 13 of the Plan);
(xii) to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Option or
Right previously granted by the Administrator;
(xiii) to institute an Option Exchange Program;
(xiv) to determine the terms and restrictions
applicable to Options and Rights and any Restricted Stock; and
(xv) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The
Administrator's decisions, determinations and interpretations shall be final
and binding on all Optionees and any other holders of Options or Rights.
6. Duration of the Plan. The Plan shall remain in effect until
terminated by the Board under the terms of the Plan, provided that in no event
may Incentive Stock Options be granted under the Plan later than 10 years from
the date the Plan was adopted by the Board.
7. Options and SARs.
(a) Options. The Administrator, in its discretion, may
grant Options to eligible participants and shall determine whether such Options
shall be Incentive Stock Options or Nonstatutory Stock Options. Each Option
shall be evidenced by a Notice of Grant which shall expressly identify the
Options as Incentive Stock Options or as Nonstatutory Stock Options, and be in
such form and contain such provisions as the Administrator shall from time to
time deem appropriate. Without limiting the foregoing, the Administrator may
at any time authorize the Company, with the consent of the respective
recipients, to issue new Options or Rights in exchange for the surrender and
cancellation of outstanding Options or Rights. Option agreements shall contain
the following terms and conditions:
(i) Exercise Price; Number of Shares. The per
Share exercise price for the Shares issuable pursuant to an Option shall be
such price as is determined by the Administrator; provided, however, that in
the case of an Incentive Stock Option, the price shall be no less than 100% of
the Fair Market Value of the
-7-
<PAGE> 30
Common Stock on the date the Option is granted, subject to any additional
conditions set out in Section 7(a)(iv) below.
The Notice of Grant shall specify the number of
Shares to which it pertains.
(ii) Waiting Period and Exercise Dates. At the
time an Option is granted, the Administrator will determine the terms and
conditions to be satisfied before Shares may be purchased, including the dates
on which Shares subject to the Option may first be purchased. The
Administrator may specify that an Option may not be exercised until the
completion of the service period specified at the time of grant. Any such
period is referred to herein as the "waiting period." At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised, which shall not be earlier than the end of the waiting period, if
any, nor, in the case of an Incentive Stock Option, later than ten (10) years,
from the date of grant.
(iii) Form of Payment. The consideration to be
paid for the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Administrator (and, in the case
of an Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) in the case
of Shares acquired upon exercise of an option, have been owned by the Optionee
for more than six months on the date of surrender, and (2) have a Fair Market
Value on the date of surrender not greater than the aggregate exercise price of
the Shares as to which said Option shall be exercised;
(5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
any broker approved by the Company, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price;
(6) any combination of the foregoing
methods of payment; or
(7) such other consideration and method
of payment for the issuance of Shares to the extent permitted by Applicable
Laws.
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(iv) Special Incentive Stock Option Provisions.
In addition to the foregoing, Options granted under the Plan which are intended
to be Incentive Stock Options under Section 422 of the Code shall be subject to
the following terms and conditions:
(1) Dollar Limitation. To the extent
that the aggregate Fair Market Value of (a) the Shares with respect to which
Options designated as Incentive Stock Options plus (b) the shares of stock of
the Company, Parent and any Subsidiary with respect to which other incentive
stock options are exercisable for the first time by an Optionee during any
calendar year under all plans of the Company and any Parent and Subsidiary
exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options.
For purposes of the preceding sentence, (a) Options shall be taken into account
in the order in which they were granted, and (b) the Fair Market Value of the
Shares shall be determined as of the time the Option or other incentive stock
option is granted.
(2) 10% Shareholder. If any Optionee to
whom an Incentive Stock Option is to be granted pursuant to the provisions of
the Plan is, on the date of grant, the owner of Common Stock (as determined
under Section 424(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company, then the following special provisions shall be
applicable to the Option granted to such individual:
(a) The per Share Option price of
Shares subject to such Incentive Stock Option shall not be less than 110% of
the Fair Market Value of Common Stock on the date of grant; and
(b) The Option shall not have a
term in excess of five (5) years from the date of grant.
Except as modified by the preceding provisions of this subsection 7(a)(iv) and
except as otherwise limited by Section 422 of the Code, all of the provisions
of the Plan shall be applicable to the Incentive Stock Options granted
hereunder.
(v) Other Provisions. Each Option granted under
the Plan may contain such other terms, provisions, and conditions not
inconsistent with the Plan as may be determined by the Administrator.
(vi) Buy-out Provisions. The Administrator may at
any time offer on behalf of the Company to buy out, for a payment in cash or
Shares, an Option previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the time that
such offer is made; provided, however, that buy-out offers made to Insiders may
only be
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payable in cash. Any such cash offer made to an Officer or Director shall
comply with the applicable provisions of Rule 16b-3, if any.
(b) SARs.
(i) In Connection with Options. At the sole
discretion of the Administrator, SARs may be granted in connection with all or
any part of an Option, either concurrently with the grant of the Option or at
any time thereafter during the term of the Option. The following provisions
apply to SARs that are granted in connection with Options:
(1) The SAR shall entitle the Optionee
to exercise the SAR by surrendering to the Company unexercised a portion of the
related Option. The Optionee shall receive in Exchange from the Company an
amount equal to the excess of (1) the Fair Market Value on the date of exercise
of the SAR of the Common Stock covered by the surrendered portion of the
related Option over (2) the exercise price of the Common Stock covered by the
surrendered portion of the related Option. Notwithstanding the foregoing, the
Administrator may place limits on the amount that may be paid upon exercise of
an SAR; provided, however, that such limit shall not restrict the
exercisability of the related Option.
(2) When an SAR is exercised, the
related Option, to the extent surrendered, shall cease to be exercisable.
(3) An SAR shall be exercisable only
when and to the extent that the related Option is exercisable and shall expire
no later than the date on which the related Option expires.
(4) An SAR may only be exercised at a
time when the Fair Market Value of the Common Stock covered by the related
Option exceeds the exercise price of the Common Stock covered by the related
Option.
(ii) Independent of Options. At the sole
discretion of the Administrator, SARs may be granted without related Options.
The following provisions apply to SARs that are not granted in connection with
Options:
(1) The SAR shall entitle the Optionee,
by exercising the SAR, to receive from the Company an amount equal to the
excess of (1) the Fair Market Value of the Common Stock covered by the
exercised portion of the SAR, as of the date of such exercise, over (2) the
Fair Market Value of the Common Stock covered by the exercised portion of the
SAR, as of the last market trading date prior to the date on which the SAR was
granted; provided, however, that the Administrator may place limits on the
aggregate amount that may be paid upon exercise of an SAR.
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(2) SARs shall be exercisable, in whole
or in part, at such times as the Administrator shall specify in the Optionee's
SAR agreement.
(iii) Form of Payment. The Company's obligation
arising upon the exercise of an SAR may be paid in Common Stock or in cash, or
in any combination of Common Stock and cash, as the Administrator, in its sole
discretion, may determine. Shares issued upon the exercise of an SAR shall be
valued at their Fair Market Value as of the date of exercise.
(c) Method of Exercise.
(i) Procedure for Exercise; Rights as a
Shareholder. Any Option or SAR granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator and as shall
be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option or SAR shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option or SAR by the person entitled to exercise the
Option or SAR and full payment for the Shares with respect to which the Option
is exercised has been received by the Company. Full payment may, as authorized
by the Administrator (and, in the case of an Incentive Stock Option, determined
at the time of grant) and permitted by the Option Agreement consist of any
consideration and method of payment allowable under subsection 7(a)(iii) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter shall be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised. Exercise of an SAR in any manner shall, to
the extent the SAR is exercised, result in a decrease in the number of Shares
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which thereafter shall be available for purposes of the Plan, and the SAR shall
cease to be exercisable to the extent it has been exercised.
(ii) Rule 16b-3. Options and SARs granted to
individuals subject to Section 16 of the Exchange Act ("Insiders") must comply
with the applicable provisions of Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(iii) Termination of Employment or Consulting
Relationship. In the event an Optionee's Continuous Status as an Employee or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option or SAR, but only within such period of
time as is determined by the Administrator at the time of grant, not to exceed
five (5) years (three (3) months in the case of an Incentive Stock Option) from
the date of such termination, and only to the extent that the Optionee was
entitled to exercise it at the date of such termination (but in no event later
than the expiration of the term of such Option or SAR as set forth in the
Option or SAR Agreement). To the extent that Optionee was not entitled to
exercise an Option or SAR at the date of such termination, and to the extent
that the Optionee does not exercise such Option or SAR (to the extent otherwise
so entitled) within the time specified herein, the Option or SAR shall
terminate.
(iv) Disability of Optionee. In the event an
Optionee's Continuous Status as an Employee or Consultant terminates as a
result of the Optionee's Disability, the Optionee may exercise his or her
Option or SAR, but only within such period of time following the date of
termination due to Disability not exceeding ten (10) years as is determined by
the Administrator (with such determination being made at the time of grant of
the Option in the case of an Incentive Stock Option and not exceeding one (1)
year), and only to the extent that the Optionee was entitled to exercise it at
the date of such termination (but in no event later than the expiration of the
term of such Option or SAR as set forth in the Option or SAR Agreement). To
the extent that Optionee was not entitled to exercise an Option or SAR at the
date of such termination, and to the extent that the Optionee does not exercise
such Option or SAR (to the extent otherwise so entitled) within the time
specified herein, the Option or SAR shall terminate.
(v) Death of Optionee. In the event of an
Optionee's death, the Optionee's estate or a person who acquired the right to
exercise the deceased Optionee's Option or SAR by bequest or inheritance may
exercise the Option or SAR, but only within ten (10) years following the date
of death, and only to the
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<PAGE> 35
extent that the Optionee was entitled to exercise it at the date of death (but
in no event later than the expiration of the term of such Option or SAR as set
forth in the Option or SAR Agreement). To the extent that Optionee was not
entitled to exercise an Option or SAR at the date of death, and to the extent
that the Optionee's estate or a person who acquired the right to exercise such
Option does not exercise such Option or SAR (to the extent otherwise so
entitled) within the time specified herein, the Option or SAR shall terminate.
(d) Option and SAR Limitation. The following limitation
shall apply to grants of Options and SARs under the Plan:
(i) No Employee shall be granted, in any fiscal
year of the Company, Options and SARs under the Plan to purchase more than
700,000 Shares.
(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 11(a).
(iii) If an Option or SAR is cancelled (other than
in connection with a transaction described in Section 11), the cancelled Option
or SAR shall be counted against the limits set forth in Section 7(d)(i). For
this purpose, if the exercise price of an Option or SAR is reduced, the
transaction will be treated as a cancellation of the Option or SAR and the
grant of a new Option or SAR.
8. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time
within which the offeree must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted
by execution of a Restricted Stock Purchase Agreement in the form determined by
the Administrator.
(b) Repurchase Option. Unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted
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<PAGE> 36
Stock purchase agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the
Company. The repurchase option shall lapse at such rate as the Administrator
may determine.
(c) Other Provisions. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its
sole discretion. In addition, the provisions of Restricted Stock Purchase
Agreements need not be the same with respect to each purchaser.
(d) Rule 16b-3. Stock Purchase Rights granted to
Insiders, and Shares purchased by Insiders in connection with Stock Purchase
Rights, shall be subject to any restrictions applicable thereto in compliance
with Rule 16b-3. An Insider may only purchase Shares pursuant to the grant of
a Stock Purchase Right, and may only sell Shares purchased pursuant to the
grant of a Stock Purchase Right, during such time or times as are permitted by
Rule 16b-3.
(e) Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent to those of
a shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 11 of the Plan.
9. Long-Term Performance Awards.
(a) Administration. Long-Term Performance Awards are
cash or stock bonus awards that may be granted either alone or in addition to
other awards granted under the Plan. Such awards shall be granted for no cash
consideration. The Administrator shall determine the nature, length and
starting date of any performance period (the "Performance Period") for each
Long-Term Performance Award, and shall determine the performance or employment
factors, if any, to be used in the determination of Long-Term Performance
Awards and the extent to which such Long-Term Performance Awards are valued or
have been earned. Long-Term Performance Awards may vary from participant to
participant and between groups of participants and shall be based upon the
achievement of Company, Subsidiary, Parent and/or individual performance
factors or upon such other criteria as the Administrator may deem appropriate.
Performance Periods may overlap and participants may participate simultaneously
with respect to Long-Term Performance Awards that are subject to different
Performance Periods and different performance factors and criteria. Long-Term
Performance Awards shall be confirmed by, and be subject to the terms of, a
Long-Term Perfor-
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mance Award agreement. The terms of such awards need not be the same with
respect to each participant.
At the beginning of each Performance Period, the Administrator
may determine for each Long-Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Common Stock to be
awarded to the participant at the end of the Performance Period if and to the
extent that the relevant measures of performance for such Long-Term Performance
Award are met. Such dollar values or number of shares of Common Stock may be
fixed or may vary in accordance with such performance or other criteria as may
be determined by the Administrator.
(b) Adjustment of Awards. The Administrator may adjust
the performance factors applicable to the Long-Term Performance Awards to take
into account changes in legal, accounting and tax rules and to make such
adjustments as the Administrator deems necessary or appropriate to reflect the
inclusion or exclusion of the impact of extraordinary or unusual items, events
or circumstances in order to avoid windfalls or hardships.
10. Non-Transferability of Options and Rights. Options and Rights
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution,
Merger, Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Rights have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option or Right, as well as the
price per share of Common Stock covered by each such outstanding Option or
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
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adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Right.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent that an
Option or Right has not been previously exercised, it will terminate
immediately prior to the consummation of such proposed action. The Board may,
in the exercise of its sole discretion in such instances, declare that any
Option or Right shall terminate as of a date fixed by the Board and give each
Optionee the right to exercise his or her Option or Right as to all or any part
of the Optioned Stock, including Shares as to which the Option or Right would
not otherwise be exercisable.
(c) Merger or Asset Sale. Subject to the provisions of
paragraph (d) hereof, in the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Right shall be assumed or an equivalent
Option or Right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Administrator shall, in lieu of such assumption or substitution,
provide for the Optionee to have the right to exercise the Option or Right as
to all or a portion of the Optioned Stock, including Shares as to which it
would not otherwise be exercisable. If the Administrator makes an Option or
Right exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Right shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option or Right will terminate upon the expiration
of such period. For the purposes of this paragraph, the Option or Right shall
be considered assumed if, immediately following the merger or sale of assets,
the Option or Right confers the right to purchase, for each Share of Optioned
Stock subject to the Option or Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets was not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation and the participant, provide for
the consideration to be received upon the exercise of the Option or Right, for
each Share of Optioned Stock subject to the Option or Right, to be solely
common stock of the successor corporation or its Parent
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equal in Fair Market Value to the per share consideration received by holders
of Common Stock in the merger or sale of assets.
(d) Change in Control. In the event of a "Change in
Control" of the Company, as defined in paragraph (e) below, then the following
acceleration and valuation provisions shall apply:
(i) Except as otherwise determined by the Board,
in its discretion, prior to the occurrence of a Change in Control, any Options
and Rights outstanding on the date such Change in Control is determined to have
occurred that are not yet exercisable and vested on such date shall become
fully exercisable and vested;
(ii) Except as otherwise determined by the Board,
in its discretion, prior to the occurrence of a Change in Control, all
outstanding Options and Rights, to the extent they are exercisable and vested
(including Options and Rights that shall become exercisable and vested pursuant
to subparagraph (i) above), shall be terminated in exchange for a cash payment
equal to the Change in Control Price, (reduced by the exercise price, if any,
applicable to such Options or Rights). These cash proceeds shall be paid to
the Optionee or, in the event of death of an Optionee prior to payment, to the
estate of the Optionee or to a person who acquired the right to exercise the
Option or Right by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of
this Section 11, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company employee benefit plan, including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities entitled to vote generally
in the election of directors; or
(ii) The shareholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve an agreement for the sale or
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disposition by the Company of all or substantially all the Company's assets; or
(iii) A change in the composition of the Board of
Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date the Plan is approved
by the shareholders, or (B) are elected, or nominated for election, to the
Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company).
(f) Change in Control Price. For purposes of this
Section 11, "Change in Control Price" shall be, as determined by the Board, (i)
the highest Fair Market Value of a Share within the 60-day period immediately
preceding the date of determination of the Change in Control Price by the Board
(the "60-Day Period"), or (ii) the highest price paid or offered per Share, as
determined by the Board, in any bona fide transaction or bona fide offer
related to the Change in Control of the Company, at any time within the 60-Day
Period, or (iii) such lower price as the Board, in its discretion, determines
to be a reasonable estimate of the fair market value of a Share.
12. Date of Grant. The date of grant of an Option or Right shall
be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Right, or such other later date as is
determined by the Administrator. Notice of the determination shall be provided
to each Optionee within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and
desirable to comply with Rule 16b-3 or with Section 422 of the Code (or any
successor rule or statute or other applicable law, rule or regulation,
including the requirements of any exchange or quotation system on which the
Common Stock is listed or quoted). Such shareholder approval, if required,
shall be obtained in such a manner and to such a degree as is required by the
applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the
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rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company.
14. Stock Withholding to Satisfy Withholding Tax Obligations.
(a) Ability to Use Stock to Satisfy Withholding. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 14. When an Optionee incurs tax liability in
connection with the award, vesting or exercise of an Option or Right, which tax
liability is subject to tax withholding under applicable tax laws (including
federal, state and local laws), the Optionee may satisfy the withholding tax
obligation (up to an amount calculated by applying such Optionee's maximum
marginal tax rate) by electing to have the Company withhold from the Shares to
be issued upon award, vesting or exercise of the Option or Right that number of
Shares, or by delivering to the Company that number of previously owned Shares,
having a Fair Market Value equal to the amount required to be withheld. The
Fair Market Value of the Shares to be withheld or delivered, as the case may
be, shall be determined on the date that the amount of tax to be withheld is
determined (the "Tax Date").
(b) Election to Have Stock Withheld. All elections by an
Optionee to have Shares withheld or to deliver previously owned Shares pursuant
to this Section 14 shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the
applicable Tax Date;
(ii) all elections shall be subject to the consent
or disapproval of the Administrator; and
(iii) if the Optionee is an Insider, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject
to such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(c) Section 83(b) Elections. In the event that (i) an
election to have Shares withheld is made by an Optionee, (ii) no election is
filed under Section 83(b) of the Code by such Optionee and (iii) the Tax Date
is deferred under Section 83 of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Right has been awarded,
has vested or has been exercised, as the case may be, but such Optionee shall
be unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.
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15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued
pursuant to the exercise of an Option or Right unless the exercise of such
Option or Right and the issuance and delivery of such Shares shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or
quoted, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option or Right, the Company may require the person exercising
such Option or Right to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned
Stock covered by an Option or Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Right shall be void with respect to such
excess Optioned Stock, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 13(b) of the Plan.
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twelve (12)
months before or after the date the Plan is adopted. Such shareholder approval
shall be obtained in the manner and to the degree required under applicable
federal and state law.
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