SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
NORWEST TELEPRODUCTIONS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
September 25, 1998
TO THE SHAREHOLDERS OF NORTHWEST TELEPRODUCTIONS, INC.:
The 1998 Annual Meeting of Shareholders of Northwest Teleproductions, Inc. will
be held at the offices of the Company, 4000 West 76th Street, Minneapolis,
Minnesota, on Friday, September 25, 1998, at 10:00 a.m., Minnesota time, for the
following purposes:
1. To set the number of members of the Board of Directors at six
(6).
2. To elect directors of the Company for the ensuing year.
3. To consider and act upon a proposal to approve the appointment
of Deloitte and Touche LLP as independent auditors of the
company for the current fiscal year ending March 31, 1999.
4. To consider and act upon an increase in the number of shares
of Common Stock reserved for issuance pursuant to the
Company's 1993 Stock Option Plan (the "Plan") from 200,000 to
260,000 shares.
5. To take action upon any other business that may properly come
before the meeting or any adjournment thereof.
Only shareholders of record shown on the books of the Company at the
close of business on August 14, 1998 will be entitled to vote at the meeting or
any adjournment thereof. Each shareholder is entitled to one vote per share on
all matters to be voted on at the meeting.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting, please sign, date and return your proxy in the
return envelope provided as soon possible. Your cooperation in promptly signing
and returning your proxy will help avoid further solicitation expense to the
Company.
This Notice, the Proxy Statement and the enclosed Proxy are sent to you
by order of the Board of Directors.
PHILLIP A. STADEN
Secretary
Dated: August 25, 1998
Minneapolis, Minnesota
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
Proxy Statement
for
Annual Meeting of Shareholders
to be held September 25, 1998
INTRODUCTION
Your proxy is solicited by the Board of Directors of Northwest
Teleproductions, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held on September 25, 1998, and at any adjournment thereof,
for the purposes set forth in the attached Notice of Annual Meeting.
The cost of soliciting Proxies, including preparing assembling and
mailing the Proxies and soliciting material, will be borne by the Company.
Directors, officers, and regular employees of the Company may, without
compensation other than their regular compensation, solicit Proxies personally
or by telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its
use at the Meeting by giving written notice of such revocation to the Secretary
or other officer of the Company or by filing a new written proxy with an officer
of the Company. Personal attendance at the Meeting is not, by itself, sufficient
to revoke a Proxy unless written notice of the revocation or a subsequent Proxy
is delivered to an officer before the revoked or superseded Proxy is used at the
Meeting.
Proxies not revoked will be voted in accordance with the choice
specified by means of the ballot provided on the proxy for that purpose. Proxies
which are signed but which lack any such specification will, subject to the
following, be voted in favor of the proposals set forth in the Notice of the
Meeting and in favor of the number and slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
Meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and lack of discretionary authority on the part of the broker to vote on
a particular matter, then the shares covered by such non-vote shall be deemed
present at the Meeting for purposes of determining a quorum but shall not be
deemed to be represented at the Meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the Company's principal executive office is 4000
West 76th Street, Minneapolis, Minnesota 55435. The Company expects that this
Proxy Statement and the related Proxy and Notice of the Annual Meeting will
first be mailed to the shareholders on or about August 25, 1998.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed August 14, 1998 as the
record date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on August 14, 1998, 1,356,425
shares of the Company's Common Stock, par value $.01 per share, were issued and
outstanding. Such $.01 par value Common Stock is the only outstanding class of
stock of the Company. Each share of Common Stock is entitled to one vote.
Holders of the Common Stock are not entitled to cumulative voting rights in the
election of directors. The presence at the Annual Meeting in person or by proxy
of the holders of a majority of the outstanding shares of the Company's Common
Stock constitutes a quorum for the transaction of business.
PRINCIPAL SHAREHOLDERS
The following table provides information concerning the only persons
known to the Company to be the beneficial owners of more than five percent (5%)
of the Company's outstanding Common Stock as of August 14, 1998.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Shares Beneficially Owned(1) Class
James H. Binger 185,109 13.6%
Revocable Trust
80 South Eighth Street
Minneapolis, MN
McDonald & Co. Securities 104,630 7.7%
800 Superior Avenue
Cleveland, OH
John C. Lorentzen and 88,500 6.5%
Penney L. Fillmer
1205 South Main Street
Wheaton, IL
- --------------------------------
(1) Unless otherwise indicated, the person listed above as the beneficial
owner of the shares has sole voting and sole investment power over the
shares. The share amounts are based upon information set forth in the
shareholder's latest filing with the Company or the Securities and
Exchange Commission, as updated by any subsequent information
voluntarily provided to the company by the shareholder.
<PAGE>
Management Shareholdings
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of August 14, 1998, by each executive officer of the
Company named in the Summary Compensation Table, by each of the Company's
current directors and by all of such directors and executive officers (including
the named individuals) as a group.
Name of Director or Number of Shares
Officer or Identity of Group Beneficially Owned(1) Percent of Class(2)
C. Dale Haworth 2,000(3) *
Ronald V. Kelly 17,500(4) *
John G. Lindell 126,937(5) 4.2%
Steven Lose 2,250(6) *
John C. McGrath 2,000(3) *
Gerald W. Simonson 43,160(4) 2.1%
Phillip A. Staden 10,300(7) *
Directors and Executive Officers
as a Group (9 persons) 204,522(8) 13.9%
- ---------------------
*Less than 1 %
(1) Unless otherwise indicated, the person listed as the beneficial owner of
the shares has sole voting and sole investment power over the shares.
(2) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person to acquire them as of August 14, 1998, or within sixty days of
such date, are treated as outstanding only when determining the percent
owned by such individual and when determining the percent owned by a group.
(3) Such shares are not outstanding but may be purchased upon exercise of
currently exercisable options.
(4) Includes 17,000 shares which may be purchased upon exercise of currently
exercisable options and warrants.
(5) Mr. Lindell has sole voting and sole investment power over 44,012 shares
owned directly by him and shares voting and investment power with his wife
over 10,925 shares. Amount includes 72,000 shares which may be purchased
upon exercise of currently exercisable options and warrants.
(6) Includes 2,000 shares which may be purchased upon exercise of currently
exercisable options.
(7) Includes 5,000 shares which may be purchased upon exercise of currently
exercisable options.
(8) Includes 117,000 shares which may be purchased upon exercise of currently
exercisable options and warrants.
ELECTION OF DIRECTORS
(Proposals #1 and #2)
General Information
The Bylaws of the Company provide that the number of directors shall
not be less than the minimum required by law and that in accordance with such
requirement the number of directors to be elected for the ensuing year shall be
determined by the shareholders at each annual meeting. The Board of Directors
recommends that the number of directors be set at six. Under applicable
Minnesota law, approval of the proposal to set the number of directors at six,
as well as the election of each nominee, requires the affirmative vote of the
holders of the greater of (1) a majority of the voting power of the shares
represented in person or by proxy at the Annual Meeting with authority to vote
on such matters or (2) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
Annual Meeting.
<PAGE>
In the election of directors, each Proxy will be voted for each of the
nominees listed below unless the Proxy withholds a vote for one or more of the
nominees. Each person elected as a director shall serve for a term of one year
and until his successor is duly elected and qualified. All of the nominees are
members of the present Board of Directors. Mr. John G. Lindell, a current
director, has advised the Company that he does not wish to stand for
re-election. If any of the nominees should be unable to serve as a director by
reason of death, incapacity or other unexpected occurrence, the Proxies
solicited by the Board of Directors shall be voted by the proxy representatives
for such substitute nominee as is selected by the Board, or, in the absence of
such selection, for such fewer number of directors as results from such death,
incapacity or other unexpected occurrence.
The following table provides certain information with respect to the
nominees for director.
<TABLE>
<CAPTION>
Current
Position(s) Director
Name of Nominee Age with Company Principal Occupation(s) During Past Five Years Since
<S> <C> <C> <C> <C>
C. Dale Haworth 65 Director Retired; Chief Executive Officer from 1970 to 1995 1996
of Haworth Group, Inc. (a media buying service);
Marketing Advertising Executive with General Mills
from 1954 to 1970.
Ronald V. Kelly 62 Director Retired; Senior Vice President from September 1992 1996
to August 1996 of Pentair, Inc. (a diversified
industrial manufacturer); Vice President and
Specialty Products Group President at Pentair from
March 1989 to September 1992.
Steven Lose 39 Director Director of North American Sales of Scitex Digital 1997
Video, Inc. (a video equipment manufacturer) since
April 1995. Regional Sales Manger of Accom, Inc.
(a video equipment manufacturer) from March 1992 to
April 1995.
John C. McGrath 40 Chairman Chairman of the Board of the Company since October 1996
and 1997, and President and Chief Executive Officer
Director from November 1996 to October 1997. Chief
Operating Officer of Cutters, Inc. (a nationally
recognized post-production and design facility)
since October 1997 and from January 1990 to
November 1996.
Gerald W. Simonson 68 Director Venture capital investor since June 1978; President 1976
and Chief Executive Officer of Omnetics Connector
Corporation (manufacturer of microminiature
connectors) since March 1991. Also currently a
director of Medtronic, Inc.
Phillip A. Staden 42 President President and Chief Executive Officer of the 1998
and Company since October 24, 1997 and Chief Financial
Director Officer of the Company since November 1996.
Controller of the Company from 1993 through
November 1996.
</TABLE>
<PAGE>
Committee and Board Meetings
The Company's Board of Directors has an Audit Committee, which reviews
with the Company's independent auditors the annual financial statements and the
results of the annual audit. The Audit Committee also is used to review
potential conflict of interest situations involving related party transactions.
The Audit Committee's members are Mr. Haworth, Mr. Kelly and Mr. Simonson. The
Audit Committee met twice during fiscal 1998.
The Board also has a Compensation Committee currently consisting of all
Board members. The Committee reviews and recommends the compensation to be paid
to the Company's officers. During fiscal 1998, the Compensation Committee met
once. The Board does not have a nominating committee.
The Company's Board of Directors held nine meetings during fiscal 1998.
Each incumbent director attended seventy-five percent or more of the total
number of meetings of the Board and of Committee(s) of which he or she was a
member.
Directors Fees
Each director who is not an employee of the Company is entitled to
receive $200 for each Board of Directors or Committee meeting attended by him or
her, with an annual maximum of $2,000, and annual fees of $4,000 payable at a
rate of $1,000 for each fiscal quarter during which he or she serves as a
director.
Certain Transactions
In order to facilitate restructure of the Company's bank line and to
provide funding for operations, in July 1996 and February 1997 the Board
authorized the issuance of $562,500 of 10.5% Subordinated Notes with a Warrant
to each investor to purchase, at $2.50 per share, a number of shares of Common
Stock of the Company equal to the principal amount of such investor's Note
divided by the Warrant exercise price. The directors of the Company purchased
$412,500 of the Notes in July 1996 and $150,000 of the Notes in February 1997.
The shares purchasable upon exercise of the Warrants granted by the Company have
been included in the Management Shareholdings table on page 3.
On October 1, 1997, the Company and its wholly-owned subsidiary,
Northwest Teleproductions Chicago, Inc., borrowed $385,000 and $27,000,
respectively, from Jeanne Lindell, wife of director John G. Lindell, as an
advance against tax refunds receivable from the federal government and two state
income tax refunds receivable from Minnesota and Illinois. The Promissory Notes,
together with interest at the rate of 10.5% per annum, were paid during the
fiscal year ended March 31, 1998 when the refunds were received.
On June 24, 1998, the Company sold to, and then leased back from,
Lindue, LLC, a Minnesota limited liability company, two parcels of land and
buildings of the Company located at 4000 West 76th Street and 4455 West 77th
Street, Minneapolis, Minnesota. The aggregate sale price for the two parcels was
$1,600,000 and was determined by negotiation between the Company and Lindue,
LLC. The two parcels were leased back to the Company under three-year leases.
The combined monthly rental expense under the two leases for the first three
years will be $16,615 in the first year, $17,030 in the second year and $17,456
in the third year. After the initial three-year term of the leases, the Company
has the option of renewing each lease for an additional five years. The monthly
rental expense will increase incrementally during the fourth through eighth
years of such lease extension from $6,882 to $7,596 for the 4000 West 76th
Street property and from $11,010 to $12,153.50 for the 4455 West 77th Street
property. The Company is also responsible for payment of taxes, operating
expenses and maintenance costs relating to the property. Lindue, LLC is owned by
director John G. Lindell.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid during the Company's last two fiscal years to the Company's
President and Chief Executive Officer and the Company's former President and
Chief Executive Officer, the only executive officers whose total salary and
bonus for fiscal 1998 exceeded $100,000. Such persons became executive officers
of the Company during fiscal 1997.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Restricted LTIP All other
Name and Fiscal Salary(1) Bonus Stock Options/ Payouts Compensation
Principal Position Year $ $ Other Awards SARs # $ $(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. McGrath 1998 131,826 0 0 None 2,000 None 2,925
Former President 1997 82,981 12,084(3) 0 None 50,000 None 2,075
Phillip A. Staden 1998 125,384 0 0 None 35,000 None 2,173
President, CEO 1997 100,635 10,000(4) 0 None 15,000 None 3,007
and CFO
</TABLE>
(1) Amounts under "Salary" also include the executive's salary deferral
contributions to the Company's 401(k) profit sharing plan.
(2) Amounts reflect Company contributions to the Company's 401(k) profit
sharing plan.
(3) Such amount was accrued but not paid.
(4) Such amount was accrued in fiscal 1997 and paid in fiscal 1998.
Option/SAR Grants During 1998 Fiscal Year
The following table sets forth the options that have been granted to
the executive officers listed in the Summary Compensation Table during the
Company's last fiscal year ended March 31, 1998:
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in the or Base Price
Name Granted fiscal Year ($/Share) Expiration Date
---- ------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
John C. McGrath 2,000(1) 2.2% $1.25 2/4/03
Phillip A. Staden 35,000(2) 37.2% $1.25 2/4/03
</TABLE>
(1) Such option was granted to Mr. McGrath in his capacity as a director and
was exercisable immediately on the date of grant.
(2) Such option is exercisable in annual increments of 11,667 shares each,
commencing February 5, 1999.
<PAGE>
Option/SAR Exercises During Fiscal 1998
And Fiscal Year-End Option/SAR Values
The following table provides certain information regarding the exercise
of stock options during fiscal 1998 by the officers named in the Summary
Compensation Table and the fiscal year-end value of unexercised options held by
such officers.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Value Number of Unexercised Options In-the-Money Options at
Acquired Realized at Fiscal Year End Fiscal Year End ($)
Name On Exercise ($) (exercisable/unexercisable) exercisable/unexercisable(1)
---- ----------- --- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. McGrath 0 0 2,000 0 0 0
Phillip A. Staden 0 0 5,000 45,000 0 0
</TABLE>
(1) Market value of underlying securities at March 31, 1998 ($1.141) minus the
exercise price.
Employment Contracts
The Company had an Employment Agreement dated November 2, 1996 with its
former President, John McGrath, which was terminated by Mr. McGrath effective
October 24, 1997. Under such Agreement Mr. McGrath received a base annual salary
of $200,000 and was eligible to receive an incentive bonus based upon 5% of
pre-tax earnings for a fiscal year in excess of 8% of shareholder equity at the
beginning of the fiscal year. The Agreement was terminable by written agreement
of the parties, by the Company for cause or by Mr. McGrath without cause upon 60
days written notice to the Company, in which case the Company had no further
obligation to Mr. McGrath except for accrued benefits and any compensation
earned through the last day of employment.
The Company has an Employment Agreement, dated May 11, 1998, with
Phillip A. Staden whereby Mr. Staden will serve as President and Chief Executive
Officer for a term continuing until October 26, 1998 and renewable annually
thereafter for one-year terms. Mr. Staden receives a base annual salary of
$150,000 and is eligible to receive an incentive bonus based upon 5% of pre-tax
earnings for a fiscal year in excess of 8% of shareholder equity at the
beginning of the fiscal year, with a maximum bonus of 50% of base salary and a
minimum bonus of $10,000. The employment relationship is terminable by written
agreement of the parties, by the Company for cause or by Mr. Staden without
cause upon 60 days written notice to the Company, in which case the Company has
no further obligation to Mr. Staden except for accrued benefits and any
compensation earned through the last day of employment. The employment
relationship may also be terminated by the Company without cause, in which case
the Company is obligated to pay (a) Mr. Staden's base salary for the unexpired
portion of the initial term of employment (or, if the Agreement has been
renewed, the unexpired portion of the one-year renewal term), (b) the greater of
(i) six months of Mr. Staden's base salary or (ii) one week of his base salary
for each full year of employment with the Company, and (c) COBRA premium
payments for continued coverage under the Company's group health plan for 12
months. If Mr. Staden's employment is not renewed by the Company for any reason
other than mutual agreement, death, disability or cause, the Company is
obligated to pay the greater of (i) six months of Mr. Staden's base salary or
(ii) one week of his base salary for each full year of employment, and COBRA
premium payments for 12 months. The Company's obligation to make any of such
payments is contingent upon Mr. Staden's abiding by the confidentiality and
noncompete provisions of the Agreement. If the employment relationship is
terminated by the Company without cause or not renewed without cause by either
party within one year of a "change of control" of the Company, the Company is
obligated to pay (a) Mr. Staden's base salary for the unexpired portion of the
initial term or renewal term of employment, but only if the employment is
terminated by the Company without cause, (b) the greater of (i) six months of
Mr. Staden's base salary or (ii) one week of his base salary for each full year
of employment with the Company, and (c) COBRA premium payments for 12 months;
provided, however, Mr. Staden will not receive any payments under the Employment
Agreement or any other agreement with the Company which would constitute a
"parachute" payment under Section 280G of the Internal Revenue Code.
<PAGE>
APPROVAL OF SELECTION OF AUDITORS
(Proposal #3)
The Board of Directors of the Company, upon recommendation of its Audit
Committee, has selected Deloitte & Touche LLP as independent auditors of the
Company for the current fiscal year ending March 31, 1999. Deloitte & Touche LLP
has acted as independent auditors for the Company since 1976. The Board of
Directors desires that the selection of such auditors for the current 1999
fiscal year be submitted to the shareholders for approval. If the selection is
not approved, the Board of Directors will reconsider its decision.
A representative of Deloitte & Touche LLP is expected to be present at
the 1999 Annual Meeting and will be given an opportunity to make a statement if
so desired. Such representative is also expected to be available to respond to
appropriate at the Meeting.
APPROVAL OF INCREASE IN SHARES RESERVED FOR 1993 STOCK OPTION PLAN
(Proposal No. 4)
General
The Board of Directors has adopted, subject to shareholder approval, an
increase in the number of shares of Common Stock reserved for issuance pursuant
to the Company's 1993 Stock Option Plan (the "Plan") from 200,000 to 260,000
shares.
A general description of the Plan is set forth below, but such
description is qualified in its entirety by reference to the full text of the
Plan, a copy of which may be obtained without charge upon written request to the
Company's Chief Financial Officer.
Description of 1993 Stock Option Plan
Purpose. The Company adopted the Plan to promote the success of the
Company by affording officers, directors, key employees and other selected
individuals the opportunity to obtain a proprietary interest in the growth and
performance of the Company. All officers, directors and key employees of the
Company or its subsidiaries, as well as consultants, advisors or other persons
performing services for the Company, are eligible to receive options under the
Plan. As of the date hereof, the Company has approximately 82 officers,
directors, employees and consultants or advisors.
Term. Incentive stock options may be granted under the Plan for a
period of ten years from the date the Plan was adopted by the Board of
Directors. Nonqualified stock options may be granted pursuant to the Plan until
the Plan is discontinued or terminated by the Board.
Administration. The Plan may be administered by either the Board of
Directors or a Committee appointed by the Board (the "Committee"). The Plan
gives broad powers to the Committee to administer and interpret the Plan,
including the authority: (i) to establish rules for the administration of the
Plan; (ii) to select the individuals eligible to receive options under the Plan;
(iii) to determine the type of option to be granted and the number of shares
covered by such options; (iv) to set the terms and conditions of such options
(which may vary from optionee to optionee); and (v) to determine under what
circumstances options may be cancelled or suspended. All determinations and
interpretations of the Committee will be binding on all interested parties.
The maximum number of shares of Common Stock reserved for issuance
under the Plan, the number of shares that may be issued pursuant to each
outstanding option and the exercise price per share may be equitably adjusted by
the Board of Directors upon the occurrence of stock dividends, stock splits or
other recapitalizations, or because of mergers, consolidations, reorganizations
or similar transactions in which the Company receives no consideration. The
Board of Directors may also provide for the protection of optionees in the event
of a merger, liquidation, reorganization, divestiture (including a spin-off) or
similar transaction after which the Company is not the surviving corporation.
Options. Options granted under the Plan may be either "incentive stock
options" within the meaning of I.R.C. Section 422 or nonqualified stock options
that do not qualify for special tax treatment under I.R.C. Section 422 or
similar provisions. Under current tax law, no incentive stock option may be
granted with a per share exercise price less than the fair market value of a
share of the underlying Common Stock on the date the incentive stock option is
granted. For nonqualified stock options, the option price ordinarily will also
be the fair market value of the underlying Common Stock on the date of grant.
The option exercise price generally may be paid in cash, by certified check or
by delivering shares of Common Stock of the Company, valued at fair market value
as of the date of exercise, unless the Committee restricts the forms of payment
available to the optionee. The closing bid price of the Company's Common Stock
on August 14, 1998 was $1.03.
The term during which the option may be exercised and whether the
option will be exercisable immediately, in stages or otherwise are set by the
Committee when the option is granted, but the term of an incentive stock option
may not exceed ten years from the date of grant. The Committee may, in its
discretion, modify or impose additional restrictions on the term or
exercisability of an option and may determine the effect that an optionee's
termination of employment with the Company or a subsidiary may have on the
exercisability of such option.
The Committee may impose additional or alternative conditions and
restrictions on incentive or nonqualified stock options granted pursuant to the
Plan; however, each incentive stock option must contain such limitations and
restrictions upon its exercise as are necessary to ensure that the option will
be an incentive stock option as defined under the Internal Revenue Code.
Following a "change of control termination," as described below, all options
granted under the Plan will become immediately exercisable and any conditions
restricting the exercisability of the options shall be deemed satisfied. Options
may not be transferred by the optionee except by will or by the laws of descent
and distribution.
Change of Control Provisions. Following a "change of control
termination" all options granted under the Plan will become immediately
exercisable. For purposes of these provisions, a "change of control termination:
refers to the following if it occurs within two years of a "change of control"
of the Company: (i) termination of the individual's employment by the Company
for reasons other than a willful failure to perform his or her employment duties
or conduct constituting a felony involving moral turpitude or (ii) the
individual terminates employment with the Company for "good reason." "Good
reason" is generally defined as an adverse change in the individual's
responsibilities, authority, compensation or working conditions, or a material
breach of an employment agreement by the Company. "Change of control" is defined
as: (i) a merger or consolidation involving the Company if less than 50% of the
Company's voting stock after the business combination is held by persons who
were shareholders before the business combination; (ii) a sale of the assets of
the Company substantially as an entirety; (iii) ownership by a person or group
of at least 20% of the Company's voting securities; (iv) approval by the
shareholders of a plan for the liquidation of the Company; and (v) certain
changes in the composition of the Board of Directors.
Amendment. The Committee may terminate or amend the Plan at any time
prior to a "change of control," except that the terms of option agreements then
outstanding may not be adversely affected without the consent of the individual.
After a change of control, the Committee may not terminate or amend the Plan to
deny participants the change of control benefits stated in the Plan. The
Committee may not amend the Plan without the approval of the Company's
shareholders if the amendment would materially increase the total number of
shares of Common Stock available for issuance under the Plan, materially
increase the benefits accruing to any individual or materially modify the
requirements as to eligibility for participation in the Plan.
Federal Income Tax Consequences of the Plan. Under present law, an
optionee will not realize any taxable income on the date a nonqualified option
is granted pursuant to the Plan. Upon exercise of the option, however, the
optionee must recognize, in the year of exercise, ordinary income equal to the
difference between the option price and the fair market value of the Company's
Common Stock on the date of exercise. Upon the sale of the shares, any resulting
gain or loss will be treated as capital gain or loss. The Company will receive
an income tax deduction in its fiscal year in which nonqualified options are
exercised, equal to the amount of ordinary income recognized by those optionees
exercising options, and must withhold income and other employment-related taxes
on such ordinary income.
<PAGE>
Incentive stock options granted under the Plan are intended to qualify
for favorable tax treatment under I.R.C. Section 422. Under Section 422, an
optionee recognizes no taxable income when the option is granted. Further, the
optionee generally will not recognize any taxable income when the option is
exercised if he or she has at all times from the date of the option's grant
until three months before the date of exercise been an employee of the Company.
The Company ordinarily is not entitled to any income tax deduction upon the
grant or exercise of an incentive stock option. Certain other favorable tax
consequences may be available to the optionee if he or she does not dispose of
the shares acquired upon the exercise of an incentive stock option for a period
of two years from the granting of the option and one year from the receipt of
the shares.
Plan Benefits. The table below shows the total number of stock options
that have been received by the following individuals and groups under the Plan:
<TABLE>
<CAPTION>
Total Number of
Name and Position/Group Options Received(1)
<S> <C>
John C. McGrath, Former President 50,000(2)
Phillip A. Staden, President 50,000
Current Executive Officer Group 80,000
Current Nonexecutive Officer Director Group 22,000
Current Nonexecutive Officer Employee Group 25,000
</TABLE>
(1) This table reflects only the total stock options granted as of August
14, 1998, without taking into account exercises or cancellations.
Because future grants of stock options are subject to the discretion of
the Committee, the future benefits that may be received by these
individuals or groups under the Plan cannot be determined at this time.
(2) Such option terminated, according to its terms, upon termination of Mr.
McGrath's employment relationship with the Company. Does not include
option for 2,000 shares granted to Mr. McGrath in his capacity as a
director of the Company and included in the amount listed for "Current
Nonexecutive Officer Director Group."
Vote Required; Recommendation
The Board of Directors recommends that the shareholders approve the
increase in the shares reserved for the 1993 Stock Option Plan. Approval of the
increase requires the affirmative vote of the greater of (i) a majority of the
shares represented at the meeting with authority to vote on such matter or (ii)
a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors,
and greater than 10% shareholders ("Insiders") are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
<PAGE>
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company, during the fiscal year ended March 31, 1998,
all Section 16(a) filing requirements applicable to Insiders were complied with
except that Mr. Steven Lose's Form 3 was filed late, Mr. Phillip Staden was late
filing forms to report two transactions and Ms. Nancy Reid and Messrs. Messrs.
David Johnson, Steven Lose and John McGrath were each late filing a form to
report one transaction.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the
1998 Annual Meeting. If any other matter does properly come before the Meeting,
the appointees named in the Proxies will vote the Proxies in accordance with
their best judgement.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1999 annual meeting must be received by the
Company by April 26, 1999 to be includable in the Company's proxy statement and
related proxy for the 1999 annual meeting.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended March 31, 1998 including financial statements, accompanies this
Notice of Annual Meeting and Proxy Statement. No part of such report is
incorporated herein or is to be considered proxy-soliciting material.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH 31, 1998 TO ANY SHAREHOLDER OF THE
COMPANY UPON WRITTEN REQUEST. REQUESTS SHOULD BE SENT TO CORPORATE SECRETARY,
NORTHWEST TELEPRODUCTIONS, INC., 4000 WEST 76TH STREET, MINNEAPOLIS, MINNESOTA
55435.
Dated: August 25, 1998
Minneapolis, Minnesota
<PAGE>
NORTHWEST TELEPRODUCTIONS, INC.
PROXY FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 25, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints PHILLIP A. STADEN and JOHN C. MCGRATH, and
each of them, with full power of substitution, his or her Proxies to represent
and vote, as designated on the reverse, all shares of Northwest Teleproductions,
Inc. registered in the name of the undersigned, at the Company's 1998 Annual
Meeting of Shareholders and at any adjournment thereof, and the undersigned
hereby revokes all proxies previously given with respect to the Meeting.
1. SET THE NUMBER OF DIRECTORS AT SIX (6):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS: Nominees: Dale Haworth, Ronald Kelly, Steve Lose,
John McGrath, Jerry Simonson and Phillip A. Staden.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except those whose names have to vote for all
been written on the line below) nominees listed above
(To withhold authority to vote for any individual nominee write that
nominee's name on the line below.)
_____________________________________________________________________________
3. APPROVE the appointment of Deloitte and Touche LLP as INDEPENDENT
AUDITORS for the current fiscal year ending March 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO APPROVE an increase in the number of shares of Common Stock reserved
for issuance pursuant to the Company's 1993 Stock Option Plan (the "Plan") from
200,000 to 260,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. OTHER MATTERS: In their discretion, the appointed Proxies are
[ ] AUTHORIZED [ ] NOT AUTHORIZED
to vote upon such other business as may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL
AND, IN THE CASE OF PROPOSAL #5, WILL BE DEEMED TO GRANT AUTHORITY UNDER
PROPOSAL #5.
Date ___________________, 1998. ______________________________________
______________________________________
PLEASE DATE AND SIGN name(s) exactly as
shown on your stock certificate. Executors,
administrators, trustees, guardians, etc.
should indicate capacity when signing.
(For stock held in Joint Tenancy, each joint
owner should sign.)
<PAGE>
Exhibit
NORTHWEST TELEPRODUCTIONS, INC.
1993 STOCK OPTION PLAN
(As Amended Through July 31, 1998)
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Affiliates" shall mean a Parent or Subsidiary of the Company.
(b) "Committee" shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board. In the
event the Company's securities are registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, each of the members of
the Committee shall be a "disinterested" person within the meaning of
Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Securities Exchange Act of 1934
as amended. As of the effective date of the Plan, a "disinterested"
person under Rule 16b-3 generally means a person who, among other
things, has not been, at any time within one year prior to his or her
appointment to the Committee (or, if shorter, during the period
beginning with the initial registration of the Company's equity
securities under Section 12 of the Securities Exchange Act of 1934, as
amended, and ending with the director's appointment to the Committee)
and who will not be, while serving on such Committee, granted or
awarded options under the Plan, or under any other plan of the Company
or any of its Affiliates entitling participants to acquire stock, stock
options, stock appreciation rights or similar rights that have an
exercise or conversion privilege or a value derived from equity
securities issued by the Company or its Affiliate, except to the extent
permitted by Rule 16b-3, or any successor provision.
(c) The "Company" shall mean NORTHWEST TELEPRODUCTIONS, INC., a
Minnesota corporation.
(d) The "Internal Revenue Code" is the Internal Revenue Code of 1986,
as amended from time to time.
(e) "Option Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 12) reserved for options pursuant to
this Plan.
(f) The "Optionee" for purposes of Section 9 is an employee of the
Company or any Subsidiary to whom an incentive stock option has been
granted under the Plan. For purposes of Section 10, the "Optionee" is
the consultant or advisor to or director, employee or officer of the
Company or any Subsidiary to whom a nonqualified stock option has been
granted.
<PAGE>
(g) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company's outstanding stock.
(h) The "Plan" means the Northwest Teleproductions, Inc. 1993 Stock
Option Plan, as amended hereafter from time to time, including the form
of Option Agreements as they may be modified by the Board from time to
time.
(i) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned,
directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
its Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers, directors, employees,
consultants, and advisors upon whose efforts the success of the Company and its
Subsidiaries will depend to a large degree.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, or any successor
provision, and through the granting of "non-qualified stock options" pursuant to
Section 10 of this Plan. Adoption of this Plan shall be and is expressly subject
to the condition of approval by the shareholders of the Company within twelve
(12) months after the adoption of the Plan by the Board of Directors. In no
event shall any stock options be exercisable prior to the date this Plan is
approved by the shareholders of the Company. If shareholder approval of this
Plan is not obtained within twelve (12) months after the adoption of the Plan by
the Board of Directors, any stock options previously granted shall be revoked.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective upon its adoption by the Board of Directors
of the Company, subject to approval by the shareholders of the Company as
required in Section 2.
<PAGE>
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time. The Board or the Committee, as the
case may be, shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to exclusive authority (where applicable and
within the limitations described herein) to determine, in its sole discretion,
whether an incentive stock option or nonqualified stock option shall be granted,
the individuals to whom, and the time or times at which, options shall be
granted, the number of shares subject to each option and the option price and
terms and conditions of each option. The Board, or the Committee, shall have
full power and authority to administer and interpret the Plan, to make and amend
rules, regulations and guidelines for administering the Plan, to prescribe the
form and conditions of the respective stock option agreements (which may vary
from Optionee to Optionee) evidencing each option and to make all other
determinations necessary or advisable for the administration of the Plan. The
Board's, or the Committee's, interpretation of the Plan, and all actions taken
and determinations made by the Board or the Committee pursuant to the power
vested in it hereunder, shall be conclusive and binding on all parties
concerned. No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith in connection with the
administration of the Plan.
In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Board or the Committee, as the case may be, shall from time to
time, at its discretion and without approval of the shareholders, designate
those employees, directors, officers, consultants, and advisors of the Company
or of any Subsidiary to whom nonqualified stock options shall be granted under
this Plan; provided, however, that consultants or advisors shall not be eligible
to receive stock options hereunder unless such consultant or advisor renders
bona fide services to the Company or Subsidiary and such services are not in
connection with the offer or sale of securities in a capital raising
transaction. The Board or the Committee, as the case may be, shall, from time to
time, at its discretion and without approval of the shareholders, designate
those employees of the Company or any Subsidiary to whom incentive stock options
shall be granted under this Plan. The Board or the Committee may grant
additional incentive stock options or nonqualified stock options under this Plan
to some or all participants then holding options or may grant options solely or
partially to new participants. In designating participants, the Board or the
Committee shall also determine the number of shares to be optioned to each such
participant. The Board may from time to time designate individuals as being
ineligible to participate in the Plan.
<PAGE>
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Option Stock. Two Hundred Sixty Thousand (260,000) shares
of Option Stock shall be reserved and available for options under the Plan;
provided, however, that the total number of shares of Option Stock reserved for
options under this Plan shall be subject to adjustment as provided in Section 12
of the Plan. In the event that any outstanding option under the Plan for any
reason expires or is terminated prior to the exercise thereof, the shares of
Option Stock allocable to the unexercised portion of such option shall continue
to be reserved for options under the Plan and may be optioned hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date as defined in
the Plan. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board.
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, certified check, Common Stock of the Company valued at
such stock's then "fair market value" as defined in Section 9 below, or such
other form of payment as may be authorized by the Board or the Committee. The
Board or the Committee may, in its sole discretion, limit the forms of payment
available to the Optionee and may exercise such discretion any time prior to the
termination of the Option granted to the Optionee or upon any exercise of the
Option by the Optionee.
<PAGE>
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to the Plan shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Board or Committee and may vary from Optionee to Optionee; provided,
however, that each Optionee and each Option Agreement shall comply with and be
subject to the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the incentive stock option. To
the extent required to qualify the Option as an incentive stock option
under Section 422 of the Internal Revenue Code, or any successor
provision, the option price per share shall not be less than one
hundred percent (100%) of the fair market value of the Common Stock per
share on the date the Board or the Committee, as the case may be,
grants the option; provided, however, that if an Optionee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any
Subsidiary, the option price per share of an incentive stock option
granted to such Optionee shall not be less than one hundred ten percent
(110%) of the fair market value of the Common Stock per share on the
date of the grant of the option. For purposes hereof, if such stock is
then reported in the national market system or is listed upon an
established exchange or exchanges, "fair market value" of the Common
Stock per share shall be the highest closing price of such stock in
such national market system or on such stock exchange or exchanges on
the date the option is granted or, if no sale of such stock shall have
occurred on that date, on the next preceding day on which there was a
sale of stock. If such stock is not so reported in the national market
system or listed upon an exchange, "fair market value" shall be the
mean between the "bid" and "asked" prices quoted by a recognized
specialist in the Common Stock of the Company on the date the option is
granted, or if there are no quoted "bid" and "asked" prices on such
date, on the next preceding date for which there are such quotes. If
such stock is not publicly traded as of the date the option is granted,
the "fair market value" of the Common Stock shall be determined by the
Board, or the Committee, in its sole discretion by applying principles
of valuation with respect to all such options. The Board or the
Committee, as the case may be, shall have full authority and discretion
in establishing the option price and shall be fully protected in so
doing.
(b) Term and Exercisability of Incentive Stock Option. The term during
which any incentive stock option granted under the Plan may be
exercised shall be established in each case by the Board or the
Committee, as the case may be. To the extent required to qualify the
Option as an incentive stock option under Section 422 of the Internal
Revenue Code, or any successor provision, in no event shall any
incentive stock option be exercisable during a term of more than ten
(10) years after the date on which it is granted; provided, however,
<PAGE>
that if an Optionee owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the
Company or of its parent or any Subsidiary, the incentive stock option
granted to such Optionee shall be exercisable during a term of not more
than five (5) years after the date on which it is granted. The Option
Agreement shall state when the incentive stock option becomes
exercisable and shall also state the maximum term during which the
option may be exercised. In the event an incentive stock option is
exercisable immediately, the manner of exercise of the option in the
event it is not exercised in full immediately shall be specified in the
Option Agreement. The Board or the Committee, as the case may be, may
accelerate the exercise date of any incentive stock option granted
hereunder which is not immediately exercisable as of the date of grant.
(c) Other Provisions. The Option Agreement authorized under this
Section 9 shall contain such other provisions as the Board or the
Committee, as the case may be, shall deem advisable. Any such Option
Agreement shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary to ensure that such option
will be considered an "incentive stock option" as defined in Section
422 of the Internal Revenue Code or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to the Plan shall be
evidenced by a written Option Agreement. The Option Agreement shall be in such
form as may be approved from time to time by the Board or the Committee and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the nonqualified stock option.
Unless otherwise determined by the Board or the Committee, as the case
may be, the option price per share shall be one hundred percent (100%)
of the fair market value of the Common Stock per share on the date the
Board or the Committee grants the option. For purposes hereof, the
"fair market value" of a share of Common Stock shall have the same
meaning as set forth under Section 9(a) herein.
(b) Term and Exercisability of Nonqualified Stock Option. The term
during which any nonqualified stock option granted under the Plan may
be exercised shall be established in each case by the Board or the
Committee, as the case may be. The Option Agreement shall state when
the nonqualified stock option becomes exercisable and shall also state
the maximum term during which the option may be exercised. In the event
a nonqualified stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the stock option agreement. The Board
or the Committee, as the case may be, may accelerate the exercise date
of any nonqualified stock option granted hereunder which is not
immediately exercisable as of the date of grant.
<PAGE>
(c) Withholding. The Company or its Subsidiary shall be entitled to
withhold and deduct from future wages of the Optionee all legally
required amounts necessary to satisfy any and all federal, state and
local withholding and employment-related taxes attributable to the
Optionee's exercise of a nonqualified stock option. In the event the
Optionee is required under the Option Agreement to pay the Company, or
make arrangements satisfactory to the Company respecting payment of,
such federal, state and local withholding and employment-related taxes,
the Board or the Committee, as the case may be, may, in its discretion
and pursuant to such rules as it may adopt, permit the Optionee to
satisfy such obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock otherwise issuable to the
Optionee as a result of the option's exercise equal to the amount
required to be withheld for tax purposes. Any stock elected to be
withheld shall be valued at its "fair market value," as provided under
Section 9(a) hereof, as of the date the amount of tax to be withheld is
determined under applicable tax law. The Optionee's election to have
shares withheld for this purpose shall be made on or before the date
the option is exercised or, if later, the date that the amount of tax
to be withheld is determined under applicable tax law. Such election
shall also comply with such rules as may be adopted by the Board or the
Committee to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations
under the Securities Exchange Act of 1934, if applicable.
(d) Other Provisions. The Option Agreement authorized under this
Section 10 shall contain such other provisions as the Board, or the
Committee, as the case may be, shall deem advisable.
SECTION 11
TRANSFER OF OPTION
No option shall be transferable, in whole or in part, by the Optionee
other than by will or by the laws of descent and distribution and, during the
Optionee's lifetime, the option may be exercised only by the Optionee. If the
Optionee shall attempt any transfer of any option granted under the Plan during
the Optionee's lifetime, such transfer shall be void and the option, to the
extent not fully exercised, shall terminate.
<PAGE>
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Option Stock reserved under Section 6 hereof and the
number of shares of Option Stock covered by each outstanding option and the
price per share thereof shall be adjusted by the Board to reflect such change.
Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to
which the adjustment relates.
Unless otherwise provided in the stock option agreement, in the event
of the sale by the Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend, divestiture
(including a spin-off) or liquidation of the Company (collectively referred to
as a "transaction"), the Board may, in connection with the Board's adoption of
the plan for such transaction, provide for one or more of the following: (i) the
equitable acceleration of the exercisability of any outstanding options
hereunder; (ii) the complete termination of this Plan and cancellation of
outstanding options not exercised prior to a date specified by the Board (which
date shall give Optionees a reasonable period of time in which to exercise the
options prior to the effectiveness of such transaction) and (iii) the
continuance of the Plan with respect to the exercise of options which were
outstanding as of the date of adoption by the Board of such plan for such
transaction and provide to Optionees holding such options the right to exercise
their respective options as to an equivalent number of shares of stock of the
corporation succeeding the Company by reason of such transaction. The grant of
an option pursuant to the Plan shall not limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 13.
INVESTMENT PURPOSE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation, those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Option Stock to Optionee, the Board or the Committee may require
Optionee to (a) represent that the shares of Option Stock are being acquired for
investment and not resale and to make such other representations as the Board,
or the Committee, as the case may be, shall deem necessary or appropriate to
qualify the issuance of the shares as exempt from the Securities Act of 1933 and
<PAGE>
any other applicable securities laws, and (b) represent that Optionee shall not
dispose of the shares of Option Stock in violation of the Securities Act of 1933
or any other applicable securities laws. The Company reserves the right to place
a legend on any stock certificate issued upon exercise of an option granted
pursuant to the Plan to assure compliance with this Section 13.
SECTION 14.
RIGHTS AS A SHAREHOLDER
An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 12 of the Plan).
SECTION 15.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 12, shall
impair the terms and conditions of any option which is outstanding on the date
of such revision or amendment to the material detriment of the Optionee without
the consent of the Optionee. Notwithstanding the foregoing, no such revision or
amendment shall (i) materially increase the number of shares subject to the Plan
except as provided in Section 12 hereof, (ii) change the designation of the
class of employees eligible to receive options, (iii) decrease the price at
which options may be granted, or (iv) materially increase the benefits accruing
to Optionees under the Plan, unless such revision or amendment is approved by
the shareholders of the Company. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause incentive
stock options to fail to meet the requirements of Section 422 of the Internal
Revenue Code.
SECTION 16.
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ for any period.
<PAGE>
SECTION 17
CHANGE OF CONTROL
(a) Definitions. For purposes of this Section 17, the following definitions
shall apply:
(1) "Change of Control" shall mean any of the following events:
(A) A merger or consolidation to which the Company is a party if the
individuals and entities who were shareholders of the Company
immediately prior to the effective date of such merger or
consolidation have, immediately following the effective date of
such merger or consolidation, beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of less
than fifty percent (50%) of the total combined voting power of
all classes of securities issued by the surviving corporation for
the election of directors of the surviving corporation;
(B) The direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of securities of
the Company representing, in the aggregate, twenty percent (20%)
or more of the total combined voting power of all classes of the
Company's then issued and outstanding securities by any person or
entity or by a group of associated persons or entities acting in
concert;
(C) The sale of the properties and assets of the Company
substantially as an entirety, to any person or entity which is
not a wholly-owned subsidiary of the Company;
(D) The shareholders of the Company approve any plan or proposal for
the liquidation of the Company; or
(E) A change in the composition of the Board of the Company at any
time during any consecutive twenty-four (24) month period such
that the "Continuity Directors" cease for any reason to
constitute at least a seventy percent (70%) majority of the
Board. For purposes of this event, "Continuity Directors" means
those members of the Board who either:
(i) were directors at the beginning of such consecutive
twenty-four (24) month period; or
<PAGE>
(ii) were elected by, or on the nomination or recommendation of,
at least a two-thirds (2/3) majority of the then-existing
Board.
(2) "Change of Control Action" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation to or
for the benefit of an Optionee under any arrangement which is
considered to be contingent on a Change of Control for purposes of
Internal Revenue Code Section 280G. As used in this definition, the
term "arrangement" means any agreement between an Optionee and the
Company or its Subsidiary and shall include, without limitation, any
and all of the Company's or the Subsidiary's salary, bonus, incentive,
restricted stock, stock option, compensation or benefit plans,
programs or arrangements and this Plan.
(3) "Change of Control Termination" shall mean, with respect to an
Optionee, any of the following events occurring within two (2) years
after a Change of Control:
(A) The termination of the Optionee's employment by the Company or
its Subsidiary for any reason, with or without cause, except for
conduct by the Optionee constituting (i) a felony involving moral
turpitude under either federal law or the law of the state of the
Company's incorporation or (ii) the Optionee's willful failure to
fulfill his employment duties with the Company or its Subsidiary;
provided, however, that for purposes of this clause (ii), an act
or failure to act by the Optionee shall not be "willful" unless
it is done, or omitted to be done, in bad faith and without any
reasonable belief that the Optionee's action or omission was in
the best interests of the Company or its Subsidiary; or
(B) The termination of employment with the Company or its Subsidiary
by the Optionee for Good Reason.
A Change of Control Termination shall not include a termination of
employment by reason of death, disability or retirement. For
purposes of this Section 17, "disability" means a mental or
physical condition of the Optionee resulting from illness, injury
or disease which, as determined by the Board or the Committee,
causes the Optionee to be unable to perform the normal duties of
his or her employment with the Company or its Subsidiary and is
reasonably expected to be of long and indefinite duration or
result in death. For purposes of this Section 17, "retirement"
means the Optionee's termination of employment on or after the
date the Optionee has attained age sixty-five (65).
<PAGE>
(4) "Good Reason" shall mean a good faith determination by the Optionee,
communicated in writing to the Board of Directors of the Company or
Subsidiary, as the case may be, that, in the Optionee's sole and
absolute judgment, any one or more of the following events has
occurred without the Optionee's express written consent after a Change
of Control:
(A) A change in the Optionee's reporting responsibilities, titles or
offices as in effect immediately prior to the Change of Control,
or any removal of the Optionee from or any failure to re-elect
the Optionee to any of such positions, which has the effect of
diminishing the Optionee's responsibility or authority;
(B) A reduction by the Company or its Subsidiary, in the Optionee's
base salary as in effect immediately prior to the Change of
Control or as the same may be increased from time to time
thereafter;
(C) A requirement imposed by the Company or its Subsidiary on the
Optionee that results in the Optionee being based at a location
that is outside of a twenty-five (25) radius mile of the
Optionee's job location at the time of the Change of Control;
(D) Without the adoption of a replacement plan, program or
arrangement that provides benefits to the Optionee that are equal
to or greater than those benefits that are discontinued or
adversely affected:
(i) The failure by the Company or the Subsidiary to continue in
effect, within its maximum stated term, any pension, bonus,
incentive, stock ownership, stock purchase, stock option,
life insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which the Optionee is participating
immediately prior to a Change of Control; or
(ii) The taking of any action by the Company or its Subsidiary
that would adversely affect the Optionee's participation or
materially reduce the Optionee's benefits under any of such
plans, programs or arrangements;
Provided, however, that this clause (4) shall not apply if the
failure to adopt such replacement plans, programs or
arrangements discontinues or adversely affects benefits
provided to all employees of the Company or the Subsidiary;
<PAGE>
(E) Any action by the Company or its Subsidiary that would materially
adversely affect the physical conditions existing at the time of
the Change of Control in or under which the Optionee performs his
or her employment duties; or
(F) If the Optionee's primary employment duties are with a Subsidiary
of the Company, the sale, merger, contribution, transfer or any
other transaction relating to the Company's ownership interest in
such Subsidiary and which decreases such ownership interest below
the level specified in Section 2.28; or
(G) Any material breach by the Company or its Subsidiary of any
employment agreement between the Optionee and the Company or its
Subsidiary.
(b) Acceleration of Vesting. Subject to the restrictions of Section 17(c)
below, in the event of a Change of Control Termination of an Optionee and
without further action of the Board, the Committee or otherwise, each incentive
stock option or nonqualified stock option granted to such Optionee pursuant to
this Plan shall become immediately exercisable in full, any restrictions that
may apply to the exercisability of the incentive stock option or nonqualified
stock option shall be deemed to be satisfied notwithstanding any provision in
this Plan or the Option Agreement to the contrary, and the incentive stock
option or nonqualified stock option shall remain exercisable until the
expiration of such option.
(c) Limitations on Change of Control Compensation. Notwithstanding anything
in this Section 17 to the contrary, an Optionee shall not be entitled to receive
any Change of Control Action which would, with respect to the Optionee,
constitute a "parachute payment" for purposes of Internal Revenue Code Section
280G. In the event any Change of Control Action would, with respect to the
Optionee, constitute a "parachute payment," the Optionee shall have the right to
designate those Change of Control Action(s) which would be reduced or eliminated
so that the Optionee will not receive a "parachute payment."
(d) Limitations on Board's and Committee's Actions. Prior to a Change of
Control, the Optionee shall have no rights under this Section 17, and the Board
shall have the power and right, within its sole discretion, by a resolution
adopted by a two-thirds (2/3) majority to rescind, modify or amend this Section
17 without any consent of the Optionee. In all other cases, and notwithstanding
the authority granted to the Board or the Committee to exercise discretion in
interpreting, administering, amending or terminating this Plan, neither the
Board nor the Committee shall, following a Change of Control, have the power to
exercise such authority or otherwise take any action which is inconsistent with
the provisions of this Section 17.
