SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement
[X] Definitive Information Statement
PHOTOCOMM, INC.
----------------------------------------
(Name of Registrant as Specified in Its Charter)
DONALD E. ANDERSON
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Information Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-1l(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) 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:(1)
4) Proposed maximum aggregate value of transaction:
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
PHOTOCOMM, INC.
7681 EAST GRAY ROAD
SCOTTSDALE, ARIZONA 85260
*********************************************
NOTICE AND INFORMATION STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 19, 1996
*********************************************
To Our Shareholders:
The 1996 Annual Meeting of Shareholders of PHOTOCOMM, INC. (the "Company") will
be held at the Resort Suites of Scottsdale, 7677 East Princess Boulevard,
Scottsdale, Arizona on January 19, 1996 beginning at 10:00 a.m. Mountain
Standard Time, for the following purposes:
1. To elect seven directors to serve for one year terms;
2. To approve an amendment to increase the number of shares of
Common Stock authorized for issuance under the Company's Stock
Option Plan from 2,445,000 to 2,895,000 shares;
3. To approve a Non-Employee Directors Stock Option Plan under
which 100,000 shares of the Company's Common Stock would be
reserved for grants of stock options to non- employee
directors; and
4. To transact such other business as may come before the
meeting. Management is presently aware of no other business to
come before the meeting.
The Board of Directors has fixed the close of business on December 20, 1995 as
the record date for the determination of Shareholders entitled to receive notice
of and to vote at the meeting or any adjournment thereof (the "Record Date").
Shares of Common Stock and Preferred Stock can be voted at the meeting only if
the holder is present at the meeting in person or by valid proxy. Management is
not soliciting proxies in connection with the Annual Meeting and Shareholders
are requested not to send proxies to the Company. A copy of the Company's 1995
Annual Report, which includes certified financial statements, was mailed with
this Notice and Information Statement to all Shareholders of record on the
Record Date.
Management of the Company cordially invites you to attend the meeting. Your
attention is directed to the attached Information Statement.
By order of the Board of Directors
Donald E. Anderson
Chairman of the Board
Scottsdale, Arizona
December 22, 1995
<PAGE>
PHOTOCOMM, INC.
7681 EAST GRAY ROAD
SCOTTSDALE, ARIZONA 85260
INFORMATION STATEMENT
This Information Statement is furnished by the Board of Directors of PHOTOCOMM,
INC. (the "Company") in connection with the Annual Meeting of Shareholders to be
held on January 19, 1996. Materials relating to the Annual Meeting were mailed
on or about December 22, 1995 to Shareholders of record at the close of business
on December 20, 1995. As of the Record Date, there were outstanding 13,514,834
shares of the Company's Common Stock and 109,972 Series A Preferred Shares and
65,165 Series AA Preferred Shares with voting rights equivalent to 439,888 and
260,660 Common shares, respectively. Shareholders are entitled to one vote for
each share of Common Stock of record and four votes for each share of Preferred
Stock of record on each matter of business to be considered at the Annual
Meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
The information included herein should be reviewed in conjunction with the
financial statements, notes to consolidated financial statements, auditor's
report and other information included in the Company's Annual Report that was
mailed with this Information Statement to all Shareholders of record on the
Record Date.
THE COMPANY
Photocomm, Inc., directly and through its wholly-owned subsidiaries
(collectively, the "Company"), is engaged primarily in the development,
manufacturing and marketing of photovoltaic (solar electric) power systems and
related products. Photovoltaic power generation is an emerging, high technology
industry based upon the recent commercial application of advanced semiconductor
devices which convert sunlight directly to electricity. The Company is one of
the largest solar electric marketing companies or "systems integrators" in North
America in terms of annual sales and number of employees. The Company's products
are primarily complete photovoltaic power systems, system components and certain
accessory products. The Company also markets the individual components of solar
electric systems, including photovoltaic modules, inverters, controllers and
batteries, as well as generators, battery chargers, switches, metering devices
and mounting hardware.
ELECTION OF DIRECTORS
Cumulative Voting
At the Annual Meeting of Shareholders, seven directors are to be elected to
serve for a term of one year or until their successors are elected and
qualified. Each Shareholder present at the annual meeting, either in person or
by proxy, will have an aggregate number of votes in the election of directors
equal to the number of persons nominated for election as directors multiplied by
the number of shares of Common Stock of the Company held by each such
shareholder on the Record Date. The resulting aggregate number of votes may be
cast by the Shareholder for the election of any single nominee, or the
Shareholder may distribute such votes among any number or all of the nominees.
The seven nominees receiving the highest number of votes will be elected to the
Board of Directors. Robert R. Kauffman, Programmed Land, Inc. and New World
Power Corporation have indicated that they will vote FOR election of all seven
directors and, therefore, it is expected that all seven nominees will be elected
to the Board.
Information Concerning Directors, Nominees and Officers
The present terms of the Company's current directors, Donald E. Anderson, Robert
R. Kauffman, Thomas C. LaVoy, Walter M. Baker, Gerald R. Cummins, John D. Kuhns
and Robert W. MacDonald, expire upon the election and qualification of their
successors at the Company's 1996 Annual Meeting of Shareholders. The Board of
Directors has nominated each of the current directors as nominees for election
as directors in the election to be held at the Annual Meeting.
The following table sets forth information regarding the officers, directors and
director nominees of the Company.
Name Age Position
- ---- --- --------
Donald E. Anderson 62 Chairman of the Board
Robert R. Kauffman 55 President, Chief Executive
Officer and Director
Thomas C. LaVoy 36 Senior Vice President,
Secretary, Chief Financial
Officer and Director
Myron D. Anduri 40 Senior Vice President,
Marketing
Robert W. Spotts 38 Vice President
Ronald Kenedi 48 Vice President
Walter M. Baker 58 Director
John D. Kuhns 45 Director
Robert W. MacDonald 48 Director
Gerald R. Cummins 69 Director
Donald E. Anderson has served as Chairman of the Board of the Company since he
founded it in 1981. Mr. Anderson has also been president and director of
Programmed Land, Inc. since its inception in 1968. Mr. Anderson received a
Bachelor of Arts degree from Minneapolis Business College.
Robert R. Kauffman has served as President and Chief Executive Officer and
Director of the Company since 1988. Mr. Kauffman acted as a consultant to the
Company from May 1987 until his election as President. From 1982 until May 1987,
Mr. Kauffman was senior vice president, marketing for ARCO Solar, Inc., a
subsidiary of the Atlantic Richfield Company. From 1978 to 1982, Mr. Kauffman
was president of ARCO Durethene Plastics Company, another Atlantic Richfield
subsidiary. Mr. Kauffman is a graduate of Lafayette College with a Bachelor of
Science in chemical engineering and holds a Masters degree in Business
Administration from the Wharton School of the University of Pennsylvania.
Thomas C. LaVoy has served as Chief Financial Officer, Senior Vice
President-Operations, Secretary and a Director of the Company since 1988. Mr.
LaVoy served as a controller and director of PLI from 1986 to 1988, during which
period Mr. LaVoy also served as Photocomm's controller on a part-time basis. Mr.
LaVoy had been an employee of PLI since 1983 and prior to that was employed by
KPMG Peat Marwick as a senior accountant. Mr. LaVoy has a Bachelor of Science
degree in Accounting from St. Cloud University and is a Certified Public
Accountant.
Myron D. Anduri has served as Senior Vice President Sales and Marketing of the
Company since January 1994. Prior to that time, he had served as Vice President
of Industrial Sales of the Company since November 1988. In November 1987, he was
employed to manage the Company's Rocky Mountain sales region. From 1978 to 1987,
Mr. Anduri owned and operated a construction firm which specialized in custom
remote homes in the Denver, Colorado area. Mr. Anduri has a Bachelor of Arts
degree in Economics from Colorado State University.
Robert W. Spotts has served as Vice President Engineering and Manufacturing of
the Company since May 1991. Prior to that time, he had served as director of
sales and operations at Solar SignAge, Inc. since 1989. From 1987 to 1989, Mr.
Spotts managed a regional sales office for Integrated Power Corporation. Mr.
Spotts has a Bachelor of Science degree in Physics/Energy Science from the
University of Colorado, and a Masters of Science Degree in Mechanical
Engineering from Drexel University of Pennsylvania.
Ronald Kenedi has served as Vice President Distribution Division of the Company
since June 1989. Prior to that time, he had served as Manager of the Company's
Consumer Division since June 1988. Since 1985, Mr. Kenedi has managed the
Company's Northern California Regional Sales Center, in charge of the mail order
division and dealer development business. From 1976 to 1985, Mr. Kenedi was
co-owner and operator of Independent Power Company, a solar electric company in
Northern California which was acquired by the Company in 1985. Mr. Kenedi has a
Bachelor of Science degree in Psychology and Fine Arts from the State University
of New York.
Walter M. Baker is an attorney at law and practices in the area of corporate law
and real estate law. He has been in private practice in the Minneapolis,
Minnesota area since 1965. Mr. Baker has served as an attorney for Programmed
Land, Inc. and its affiliates since the early 1970's. Prior to his entry into
the practice of law, he served in various capacities with small Minnesota
business organizations. He is a graduate of the University of Minnesota and the
William Mitchell College of Law.
John D. Kuhns became a Director of the Company in November 1993. Mr. Kuhns has
been chairman of the board of The New World Power Corporation since 1989. From
October 1986 through April 1989, Mr. Kuhns was chairman and chief executive
officer of Wolverine Power Corporation. At various times from 1982 to 1988, Mr.
Kuhns was president, chief executive officer and a director of Catalyst Energy
Corporation, an independent power and steam producer. Mr. Kuhns is also co-
chairman of East Rock Partners, Inc., an investment and management company, and
in connection therewith was a director or officer of several privately-held
companies. From October 1986 through June 1988, Mr. Kuhns was also chairman of
Kuhns Brothers & Laidlaw, Inc., a New York Stock Exchange member firm. Mr. Kuhns
had previously been employed at Salomon Brothers, Inc., where he specialized in
energy project financing. Mr. Kuhns received a Bachelor's degree from Georgetown
University, a Master of Fine Arts from the University of Chicago and an M.B.A.
from Harvard University.
Robert W. MacDonald became a Director of the Company on December 4, 1995. Mr.
MacDonald has been a Director of The New World Power Corporation since 1990. He
was a founder of Catalyst Energy Corporation, an independent power and steam
producer, and served as a director, Executive Vice President and Chief Operating
Officer of Catalyst until 1988. He is currently a Managing Director of William
E. Simon & Sons, Inc., a merchant banking firm located in Los Angeles,
California. Mr. MacDonald received a Bachelor's degree from Fairfield
University.
Gerald R. Cummins became a Director of the Company in November 1994. Mr. Cummins
has been a director of The New World Power Corporation since October 1990 and a
private investor for more than five years. Mr. Cummins is a political strategist
who served as chairman of The New York State Thruway Authority. Mr. Cummins was
the campaign manager for Hugh L. Carey, the former Governor of New York.
Meetings and Compensation
During the year ended August 31, 1995, the Board of Directors of the Company met
on four occasions. Each of the Company's Directors attended 75% or more of the
meetings of the Board of Directors.
The Company's non-employee Directors receive $1,000 per meeting for their
services to the Company, and are reimbursed for reasonable travel expenses
incurred in connection with attendance at each meeting of the Board of
Directors.
The Board of Directors has Audit and Compensation Committees. The Audit
Committee, which is comprised of Donald E. Anderson and John D. Kuhns, is
responsible for reviewing with the independent auditors and management of the
Company the annual audit, the adequacy and effectiveness of the accounting and
financial controls of the Company, the accounting policies of the Company, and
the annual and interim financial statements and SEC filings of the Company. The
Audit Committee was formed on October 27, 1995.
The Compensation Committee, which is currently comprised of Gerald R. Cummins
and Walter M. Baker, is responsible for administering the Company's Stock Option
Plan, recommending and approving stock option grants, and reviewing and
recommending the Company's compensation packages and policies for the executive
officers and other employees. The Compensation Committee met once during the
1995 fiscal year.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements.
At August 31, 1995, the Company did not have any employment contracts, severance
or change-in-control arrangements with any of its executive officers.
EXECUTIVE COMPENSATION
The table below sets forth information regarding the annual compensation to
Robert R. Kauffman for services in all capacities to the Company during the
fiscal years ended August 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
------------ ----------------
Fiscal Annual Number of
Name(1) Year Salary(2) Options Awarded
- ---------------------- ------ ------------ ----------------
Robert R. Kauffman
President, Chief 1995 $209,500 200,000
Executive Officer 1994 $169,000 200,000
and Director 1993 $162,000 200,000
- --------------------
(1) Mr. Kauffman is the only officer of the Company to earn an annual
salary greater than $100,000 in any of the last three fiscal years.
Donald E. Anderson, Chairman of the Board, does not receive
compensation directly from the Company, but is an employee of and
compensated by PLI. Mr. Kauffman was not paid a bonus or any long-term
compensation during the last three fiscal years.
(2) Does not include fees of $400.00 per quarterly board meeting for all
inside directors.
The following table sets forth information regarding option grants to Mr.
Kauffman during the fiscal year ended August 31, 1995.
Option Grants in Fiscal Year 1995
(Individual Grants)
---------------------------------
% of Total
Number of Options Granted
Options to Employees Exercise Expiration
Name Granted(1) in Fiscal Year Price Date
- ---- ---------- --------------- -------- ----------
Robert R. Kauffman 200,000 50% $1.625 December 1, 2004
- --------------------
(1) Vesting for Mr. Kauffman's options occur over a three year period,
with 25%, 50% and 100% vesting occurring in 1995, 1996 and 1997
respectively.
The following table sets forth information regarding the number and value of
stock options held by Robert R. Kauffman at August 31, 1995, and the exercise of
stock options by Mr. Kauffman during the fiscal year ended August 31, 1995.
<TABLE>
Aggregated Option/Exercises in Fiscal
Year 1995 and Fiscal Year-End Option Values
-------------------------------------------
<CAPTION>
Value of Unexercised
Number of Exercised Number of Unexercised In-the-Money Options
Options at 8/31/95 Options at 8/31/95 at 8/31/95(1)
------------------- --------------------- --------------------
Name Shares
- ---- Acquired on Value
Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Kauffman 206,900 $ 362,000 820,000 100,000 $1,156,250 100,000
- -----------------
(1) Represents the difference between the closing price of the Company's
Common Stock on August 31, 1995 and the exercise price of the options.
(2) Represents the difference between the exercise price of the options
and the price of the Company's Common Stock on the dates of exercise.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective October 1, 1993, the Company acquired $473,000 of solar illuminated
billboard systems from Donald E. Anderson, Bakerson, Inc. (a company owned by
Walter Baker and Donald E. Anderson), Cedric Adams, PLI and Robert R. Kauffman.
The Company offset $82,000 of its outstanding accounts receivable from the
group, paid approximately $25,000 in cash and issued 20,000 shares of its Series
AA Convertible Preferred Stock to Robert R. Kauffman for $108,000, as down
payment on the transaction effective October 1, 1993. The remaining outstanding
balance of the transaction, $258,000, is in the form of notes payable to Donald
E. Anderson, Bakerson, PLI, Cedric Adams and Robert R. Kauffman. The notes
payable are unsecured, bear a 10% annual interest rate and are payable over
three years in monthly installments of $8,076. The notes can be prepaid at
anytime by the Company. On November 15, 1993, the Company prepaid $78,000 of the
outstanding notes payable. The remaining principal balance as of August 31, 1995
for the group is approximately $70,191 made up of notes payable of $22,952 to
Donald E. Anderson, $36,150 to Bakerson and $11,089 to Cedric Adams. The
adjusted monthly payments effective August 31, 1995, are approximately $5,700,
based upon a three year amortization schedule at a 10% annual interest rate.
On November 9, 1993, the Company entered into a new financing agreement with
NWP, Westinghouse, PLI and Robert R. Kauffman (the "Stock Purchase Agreement").
Pursuant to the Stock Purchase Agreement, the Company sold 1,600,000 shares of
restricted Common Stock to NWP for $1.25 per share. The Company also issued to
NWP an option to purchase an additional 2,600,000 shares of restricted Common
Stock of the Company at $2.50 per share until December 31, 1995, and up to
1,500,000 shares of unregistered shares of Common Stock of the Company at $3.00
per share until December 31, 1996 (the "NWP Option"). Certain officers and
directors of the Company who own, or have an option to purchase, an aggregate of
1,000,000 shares of Common Stock shall have the right, but not the obligation,
to sell such 1,000,000 shares to NWP upon the exercise of the NWP Option in lieu
of shares to be issued by the Company. In conjunction with the Stock Purchase
Agreement, NWP acquired 500,000 shares of unregistered Common Stock from PLI at
$1.25 per share. NWP also acquired an option to purchase 2,000,000 unregistered
shares from PLI at $2.00 per share until December 31, 1994, and also acquired a
right of first refusal from PLI with respect to all of its shares of Company
stock. In fiscal 1995, NWP exercised part of its option and purchased 1,000,000
shares from PLI; 1,000,000 shares subject to the option expired on December 31,
1994.
NWP beneficially owns 6,612,447 shares of Common Stock as of November 3, 1995,
pursuant to the Stock Purchase Agreement, the Exchange Agreement and open market
purchases, which represents approximately 49.3% of the issued and outstanding
shares of Common Stock and approximately 46.5% of the total voting shares of the
Company. Furthermore, NWP has the right to acquire 4,100,000 shares from the
Company and has a right of first refusal from Robert Kauffman for 1,000,000
shares pursuant to the Stock Purchase Agreement. If NWP were to acquire all of
the foregoing shares, when added to the 6,612,447 shares it presently holds, NWP
would hold 67% of the issued and outstanding Common Stock of the Company.
The Company granted registration rights to NWP with respect to all of the shares
of Company Common Stock issued to or purchased by NWP pursuant to the Stock
Purchase Agreement. The registration rights give NWP the one-time right to
register all of the above shares upon written notice at any time after the
six-month anniversary of the Stock Purchase Agreement. NWP's exercise of the
registration right will require the Company to register the Common Stock
pursuant to a Form S-3 Registration Statement. The Company has agreed to pay up
to $40,000 in costs associated with such filing. All NWP underwriting costs and
commissions will be paid by NWP. The Company has the right to defer registration
of its Common Stock up to 180 days after notice if it determines that such
registration would be detrimental to the Company or its stockholders.
In October 1995, the Company leased 6,500 square feet of office/warehouse space
in a 20,000 square foot office/warehouse building adjacent to the Company's
corporate headquarters. The Company has a lease option for an additional 2,150
square feet in the same building through May of 1996. On October 18, 1995, a
partnership including the Company's CEO, Robert Kauffman, and CFO, Thomas LaVoy,
opened escrow for the purchase of this adjacent building. The Company's present
lease was negotiated at fair market value rates with the present owner of the
facility. If Messrs. Kauffman and LaVoy purchase the building, the present lease
will be continued and, if the Company needs facilities, it is anticipated that
additional space may be leased on those premises.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of November 3, 1995, concerning
shares of voting stock beneficially owned by each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock of the Company, by each director of the Company, the Named Officer and all
directors and officers of the Company as a group.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Number of
Number of Series A Series AA
Name & Address of Common Percent Preferred Percent Preferred Percent
Beneficial Owner(1) Shares of Class(2) Shares of Class(3) Shares of Class(4)
- ----------------------------- ----------------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Robert Kauffman 1,757,125(5) 13.1% 95,763 87.1% 40,000 37.6%
- ---------------------------------------------------------------------------------------------------------------------------------
Donald Anderson 25(6) * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas LaVoy 112,800(7) * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Walter Baker -- * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
John Kuhns(8) -- * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Robert MacDonald(8) -- * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Gerald R. Cummins(8) -- * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Programmed Land, Inc. 1,690,000 12.6% -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
New World Power Corp.(8) 6,612,447 49.3% -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
All Officers and Directors 2,033,175(9) 15.1% 95,763 87.1% 40,000 57.6%
as a Group (11 persons)
- ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------
* Less than 1%.
(1) The address of Messrs. Kauffman, LaVoy and Baker is 7681 E. Gray Road,
Scottsdale, Arizona 85260. The address of Mr. Anderson, as well as
that of Programmed Land, Inc., is 9414 E. San Salvador, Scottsdale,
Arizona 85258. The address of The New World Power Corporation, as well
as John Kuhns, and Gerald Cummins is 558 Lime Rock Road, Lime Rock, CT
06039.
(2) Based upon 13,401,859 shares of Common Stock outstanding as of
November 3, 1995.
(3) Based upon 109,972 Series A Convertible Preferred shares outstanding
as of November 3, 1995. Each preferred share is convertible into four
Common shares at any time. The Common Stock equivalents of 439,888
represents 3.1% of the equity of the Company.
(4) Based upon 69,365 Series AA Convertible Preferred shares outstanding
as of November 3, 1995. Each preferred share is convertible into four
Common shares at any time. The Common Stock equivalents of 277,460
represent 2.0% of the equity of the Company.
(5) Includes 722,000 shares of Common Stock issuable upon exercise of
vested stock options currently held by Mr. Kauffman. Does not include
383,052 shares of Common Stock issuable upon conversion of the 95,763
shares of Series A Preferred Stock held by Mr. Kauffman or 160,000
shares of Common Stock issuable upon conversion of 40,000 shares of
Series AA Preferred Stock.
(6) Donald Anderson owns 73.3% of PLI. The Donald E. Anderson Family Trust
owns 11.5% of PLI. In turn, PLI owns 1,690,000 shares of Common Stock
of the Company which represents 12.6% of the issued and outstanding
Common Stock of the Company at November 3, 1995. Mr. Anderson
disclaims beneficial ownership of the shares owned by PLI.
(7) Includes 112,675 shares of Common Stock issuable upon exercise of
vested stock options held by Mr. LaVoy.
(8) John D. Kuhns beneficially owns more than 5% of the common stock of
The New World Power Corporation ("NWP"). In addition, Gerald Cummins
and Robert MacDonald each beneficially own less than 1% of the common
stock of NWP. In turn, NWP owns 6,612,447 shares of Common Stock of
the Company, representing 49.3% of the issued and outstanding Common
Stock at December 15, 1995. This does not include 4,100,000 shares of
Common Stock issuable upon exercise by NWP of options issued by the
Company, and 1,000,000 shares of Common Stock purchasable by NWP
pursuant to its right of first refusal granted by Robert R. Kauffman.
If NWP acquired all the foregoing shares of Common Stock, it would own
a total of 11,712,447 shares, representing approximately 67% of the
issued and outstanding Common Stock of the Company.
(9) Includes 975,925 shares of Common Stock issuable upon exercise of
vested stock options currently held by all officers and directors as a
group.
</TABLE>
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and beneficial owners of more than ten percent of
the Common Stock to file with the Securities and Exchange Commission initial
statements of beneficial ownership and statements of changes in beneficial
ownership of the Common Stock and other equity securities of the Company held by
such persons. The Company believes, based solely upon a review of the copies of
such beneficial ownership change statements furnished to it, that during the
fiscal year ended August 31, 1995, all Section 16(a) filing requirements
applicable to the Company's officers, directors and beneficial owners of more
than ten percent of the Common Stock of the Company were complied with.
<PAGE>
PROPOSAL NO. 1
APPROVAL OF AMENDMENT TO STOCK OPTION PLAN
At the Annual Meeting, the Company will seek Shareholder approval of an
amendment to the Company's Stock Option Plan (the "Plan") to increase the number
of shares of Common Stock authorized for issuance under the Plan from 2,445,000
to 2,895,000 shares. Substantially all] of the 2,445,000 shares currently
authorized have been exercised or are reserved for issuance upon exercise of
outstanding options. The Plan provides officers and other key employees of the
Company with an incentive to achieve and sustain a superior level of
performance, and aligns their interests with the interests of the Company's
Shareholders.
In General
- ----------
The Company adopted the Plan in February 1990, which was subsequently amended on
April 17, 1991. On January 15, 1993, the Shareholders approved an amendment to
the Plan to increase the number of shares of Common Stock authorized for
issuance upon exercise of options under the Plan from 1,250,000 shares to
2,000,000 shares. On January 20, 1995, the Shareholders approved an amendment to
the Plan to increase the number of shares of Common Stock authorized for
issuance from 2,000,000 to 2,445,000 shares. Options granted under the Plan may
be either (i) options intended to constitute incentive stock options ("ISOs")
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
or (ii) non-statutory options. ISOs may be granted under the Plan to employees
and officers of the Company.
The Plan is administered by an impartial committee, comprised of disinterested
Board of Director members. The Committee, within the limitations of the Plan,
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate of exercise of each option, the exercise price per share
and the manner of exercise, and the time, manner and form of payment upon
exercise of an option. In determining whether to grant options to particular
employees under the Plan, the Committee considers a variety of factors,
including the contribution that the employee is expected to make to the Company,
the employee's past and present contributions to the Company, comparable equity
compensation offered by other similarly situated companies to employees of
comparable rank, prior option grants to the employee, and the number of
outstanding options held by such employee, if any.
As of December 15, 1995, 934,675 options granted under the Plan have been
exercised.
Reason for Approval
- -------------------
The grant of stock options pursuant to a plan which has been approved by
shareholders and meets certain conditions is exempt from the "short-swing
profits" liability provisions of Section 16(b) of the Securities and Exchange
Act of 1934, as amended (the "Act"). Section 16(b) provides that upon the
purchase and sale (or sale and purchase) of the Company's Common Stock within
any six month period by a principal officer, director or beneficial owner of
more than 10 percent of the Company's Common Stock, any "profit" realized by
such person is recoverable by the Company. Thus, shareholder approval of the
amendment to the Plan is sought in order to exempt from the liability provisions
of Section 16(b) the grant of options to principal officers, directors and
beneficial owners of 10 percent of the Company's Common Stock who are eligible
to participate in the Plan. In addition, shareholder approval of the amendment
to the Plan is necessary in order that ISOs granted under the Plan will qualify
for treatment as such under the Code.
Plan Provisions
- ---------------
Options may be granted to key employees of the Company, including officers who
are members of the Board of Directors. As of December 8, 1995, approximately 40
employees of the Company were eligible to participate in the Plan.
An optionee may exercise an ISO at any time within five years from the date of
grant (or such other period not to exceed 10 years as determined by the Board).
With respect to non-statutory stock options, an optionee may exercise such
options at any time within 11 years from the date of grant. Options are
evidenced by written agreements which typically provide that the right to
exercise vests in fractional amounts over a one- to three-year period commencing
on the first anniversary of the date of the option grant. The exercise price of
an ISO must equal or exceed the fair market value of the Common Stock on the
date of grant, and the exercise price of ISOs granted to ten percent
shareholders must equal or exceed 110% of the Common Stock's fair market value
on the date of grant. The aggregate fair market value of shares for which ISOs
granted to any employee exercisable for the first time by such employee may not
exceed $100,000. Non-statutory options granted under the plan may be issued at a
price less than fair market value of the Common Stock on the date of grant. The
options generally become exercisable over a four year period, and ultimately
lapse if unexercised at the end of ten years.
The exercise price of options may be satisfied with (i) cash, (ii), subject to
certain federal income tax and securities law restrictions, shares of the
Company's Common Stock with an aggregate fair market value on the date of
delivery equal to the exercise price, or (iii) a combination of the foregoing.
The Company may assist an optionee in paying the exercise price of options by
(i) extending a loan to the optionee or (ii) guaranteeing a loan obtained by the
optionee from a third party. Optionees exercising non-statutory stock options
may authorize the Company to satisfy its withholding tax obligations by
retaining such number of the shares subject to the option having an aggregate
fair market value on the exercise date equal to the Company's withholding tax
obligations.
The option price, number of shares of Common Stock subject to the Plan and the
number of shares issuable upon the exercise of each option will be increased or
decreased, as appropriate, to reflect any stock merger, consolidation, stock
split, stock dividend or other similar capital adjustment.
An option granted under the Plan may not be transferred except by bequest or
inheritance and, during the lifetime of the optionee to whom granted, the option
may only be exercised by such optionee. Unexercised options expire on the date
that an optionee's employment is terminated, except if such termination is
voluntary or is due to death or disability. If termination is voluntary or due
to retirement (in each case with the consent of the Board) the optionee may
exercise his options at any time within 30 days (or such other period of time
not exceeding three months as is determined by the Board) from the date of
termination. If termination is due to disability, the optionee may exercise his
options at any time within three months (or such other period of time not
exceeding 12 months as is determined by the Board) from the date of termination.
If an optionee dies while employed by the Company, any options held by such
optionee may be exercised for a period of one year from the date of death (or
such other period of time as is determined by the Board) by the executors or
administrators of the optionee's estate, or by any person who acquired the
option directly from the optionee by bequest or inheritance, but only to the
extent that the optionee was entitled to exercise the options on the date of
death. None of the foregoing applies to a non-statutory stock option to the
extent otherwise provided in the option agreement relating thereto.
The Board of Directors may amend or terminate the Plan at any time. No amendment
of the Plan may increase the number of shares reserved under the Plan,
materially increase the benefits accruing to participants under the Plan or
change the designation of employees eligible to participate in the Plan without
prior shareholder approval. No amendment or termination of the Plan may alter or
impair any rights or obligations under any option previously granted under the
Plan, without the consent of the holder thereof.
Federal Income Tax Consequences
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The Plan is not a "qualified plan" as defined in Section 401(a) of the Code, nor
is it subject to the Employee Retirement Income Security Act of 1974, as
amended.
With respect to ISOs, neither the grant of the option nor the exercise of the
option by an optionee will result in income to the optionee. The ultimate sale
or other disposition by the optionee of the shares of Common Stock obtained upon
exercise of the ISO will result in capital gain or loss equal to the difference
between the fair market value on the date of sale and the exercise price. A
disposition of shares acquired pursuant to an option which results in a net
capital gain will be taxed at the ordinary income rate (but not more than 28%).
If the stock is disposed of at a price less than the exercise price, the loss
will be capital loss. In 1995, capital losses are deductible for individuals to
the extent of capital gains plus an amount not exceeding $3,000 ($1,500 for
married individuals filing separately).
The Company will not be allowed a deduction with regard to the ISO at the time
of its grant, its exercise or the ultimate sale of the Common Stock. However, if
an optionee sells or disposes of the Common Stock prior to two years after the
date of the grant of the ISO or one year after the date of the exercise, the
optionee will recognize compensation income on the sale to the extent the value
of the Common Stock on the date of exercise exceeds the exercise price. The
excess of the amount received on the sale over the value on the date of exercise
(if any) will be capital gain. In the case of such a premature disposition of
the Common Stock, the Company may deduct the amount of income recognized as
compensation income. A person entitled to exercise an incentive stock option
after the death of an optionee may sell the Common Stock obtained on the
exercise of the option at any time without regard to the foregoing holding
period requirements.
While the exercise of an ISO will not generate compensation income at the time
of exercise, the excess of the fair market value of the stock on the date of
exercise over the exercise price is treated as a tax preference item for
purposes of the alternative minimum tax. The impact of the alternative minimum
tax rules will depend upon the individual circumstances of each employee.
In the event the Committee permits an ISO to be exercised with Common Stock of
the Company acquired by the exercise of an ISO, the use of such stock to
exercise an ISO prior to completion of the minimum holding periods applicable to
such stock will be treated as a premature disposition resulting in ordinary
income to the employee.
With respect to non-statutory stock options, since such options are not readily
marketable, an optionee does not realize any compensation income upon the grant.
Additionally, the Company may not take a tax deduction at the time of the grant.
Upon exercise of a non-statutory stock option, an optionee realizes and must
report as compensation income an amount equal to the difference between the fair
market value of the shares on the date of exercise and the exercise price. The
Company is entitled to take a deduction at the same time and in the same amount,
provided the Company withholds federal income tax in accordance with the Code
and the applicable Treasury regulations.
Subject to the approval of the Board, an optionee may make an irrevocable
election to have the Company withhold from those shares that would otherwise be
received upon the exercise of the option, a number of shares having a fair
market value equal to the minimum amount necessary to satisfy the Company's
federal, state, local and foreign tax withholding obligations and FICA and FUTA
obligations with respect to the exercise of such option by the optionee. The
Company shall be entitled if necessary or desirable to pay or withhold the
amount of any tax attributable to the delivery of Common Stock under the Plan
from other amounts payable to the optionee after giving the person entitled to
receive such Common Stock notice as far in advance as practical, and the Company
may defer making delivery of such Common Stock if any such tax may be pending
unless and until indemnified to its satisfaction.
In addition to the foregoing federal tax considerations, the exercise of an
option and the ultimate sale of the shares acquired thereby are subject to state
income taxation. The impact of state income taxation laws will depend upon the
residence and individual circumstances of each optionee.
Required Vote
- -------------
Approval of the amendment to the Plan as described herein will require the
affirmative vote of the majority of the combined voting power of the shares of
Common Stock and Preferred Stock entitled to vote at the Annual Meeting.
However, because Robert Kauffman, The New World Power Corporation and Programmed
Land, Inc. have indicated that they will vote FOR approval of the amendment to
the Plan, it is expected that the amendment to the Plan will be approved.
PROPOSAL NO. 2
APPROVAL OF NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
General
At the Annual Meeting, the Company will seek shareholder ratification of a
Non-Employee Directors Stock Option Plan (the "Directors Plan") that authorizes
the issuance of up to 100,000 shares of Common Stock pursuant to option grants.
The Directors Plan is intended to provide non-employee directors with an
incentive to actively direct and contribute to the Company's growth by enabling
them to acquire a proprietary interest in the Company. The Company's Board of
Directors adopted the Directors Plan on December 4, 1995 (the "Effective Date")
and has directed that the Directors Plan be submitted as a proposal for
Shareholder adoption at the Annual Meeting.
Plan Provisions
The Directors Plan provides for the non-discretionary grant of nonstatutory
stock options to the Company's non-employee directors. On the Effective Date,
each non-employee director was granted an option to acquire 10,000 shares of the
Company's Common Stock. Each non-employee director who joins the Board of
Directors after the Effective Date will likewise receive an option to acquire
10,000 shares of the Company's Common Stock. In addition to the foregoing option
grants, a grant of options to purchase 3,000 shares of the Company's Common
Stock will be made annually to each non-employee director on December 1 each
year, commencing on December 1, 1996; provided that such director has attended
at least 75% of the meetings of the Board of Directors and of the Board
Committees of which such non-employee director is a member in the preceding
fiscal year.
Pursuant to the terms of the Directors Plan, each option granted will vest
one-fourth on the date of grant, an additional one-fourth on the first
anniversary of the option grant and the remaining one-half on the second
anniversary of the option grant, provided the optionee remains an Eligible
Director (as defined in the Directors Plan) at such vesting dates. Accordingly,
each option grant will be vested and exercisable with respect to the 25% of the
underlying shares on the date of grant, 50% of the underlying shares on the
first anniversary and 100% of the underlying shares on the second anniversary.
The exercise price of all options granted under the Directors Plan will be the
Fair Market Value of the Company's Common Stock on the grant date. All options
granted under the Directors Plan will expire ten (10) years from the date of
grant. Options are not transferrable other than by will, under the laws of
descent and distribution, or pursuant to a qualified domestic relations order,
and each option is exercisable during the lifetime of the optionee only by the
optionee. Unexercised options terminate one year from the date an individual
ceases to be a director of the Company due to death or disability and thirty
(30) days after an individual ceases to be a director for any other reason. The
Directors Plan terminates ten (10) years after the Effective Date, except as to
outstanding options. A copy of the Directors Plan is attached hereto as Exhibit
"A".
As of December 15, 1995, options to purchase 50,000 shares of Common Stock had
been granted to non-employee directors pursuant to the Directors Plan; such
options have a term of ten years with an exercise price of $2.8125 per share,
which was the fair market value of the underlying shares on the date of grant.
Federal Income Tax Consequences for Nonstatutory Stock Options
The Directors Plan will not be a "qualified plan" as defined in Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory
stock options ("NSOs") do not qualify as "incentive stock options" under Section
422 of the Code.
An Optionee does not realize any compensation income upon the grant of an NSO.
Additionally, the Company may not take a tax deduction at the time of the grant.
Upon exercise of an NSO, an Optionee realizes and must report as compensation
income in an amount equal to the difference between the fair market value of the
Common Stock on the date of exercise and the exercise price. The Company is
entitled to take a deduction at the same time and in the same amount as the
Optionee reports as compensation income, provided the Company withholds federal
income tax in accordance with the Code and applicable Treasury regulations.
Special rules apply with respect to shares of Common Stock transferred directly
to or acquired upon exercise of an NSO by an individual (officer, director of
the Company of 10% shareholder (an "Insider") who is subject to the "short-swing
profits" provisions of the Securities Exchange Act of 1934 (the "Exchange Act").
With respect to Common Stock acquired by an Insider, the date six (6) months
after the date of exercise of an option is generally the relevant date for
determining when the Insider recognizes compensation income, the amount of such
compensation income (and the Company's corresponding deduction), for
establishing the Insider's basis in the shares of Common Stock acquired and the
start of the holding period of such shares for tax purposes. An Insider may
elect to accelerate the recognition of income under Section 83(b) of the Code.
Such an election must be made within thirty (30) days after exercise of an
Option and results in the inclusion of the excess value of the Common Stock at
exercise over the exercise price of the option in income.
When an Optionee disposes of the shares of Common Stock received upon exercise
of an NSO, he or she will realize capital gain income if the amount realized on
the sale exceeds the Optionee's basis in the shares. If the Optionee's basis in
the shares exceeds the amount realized on the sale, the Optionee will realize a
capital loss. An Optionee's basis in the optioned shares if equal to the
exercise price plus any additional compensation income realized by the Optionee
upon exercise of the option. A disposition of shares of Common Stock which
results in a net long-term capital gain will be taxed at the ordinary income
rate (but not at a rate in excess of 28%). Capital losses are currently
deductible for individuals to the extent of capital gains plus an amount not
exceeding $3,000 ($1,500 for married individuals filing separately). There is no
tax impact to the Company upon the sale of the shares by an Optionee.
In addition to the foregoing federal tax considerations, the exercise of an
Option and the ultimate sale or other disposition of the shares of Common Stock
acquired thereby will in most cases be subject to state income taxation.
If the Optionee is an Insider subject to the short-swing profit liability
provisions set forth in Section 16 of the Exchange Act, then an election to
withhold stock is subject to the following additional restrictions: (i) no
election shall be effective for a Tax Date (as hereinafter defined) which occurs
within six (6) months of the grant of the award, except that this limitation
shall not apply in the event of death or disability of the participant prior to
the expiration of the six-month period and (ii) the election must be made either
six (6) months prior to the Tax Date or must be made during a period beginning
on the third business day following the date of release for publication of the
Company's quarterly or annual summary statements of sales and earnings and
ending on the twelfth business day following such date. "Tax Date" means the
date an Optionee is required to pay the Company an amount with respect to tax
withholding obligations in connection with the exercise of an option.
Required Vote
Approval of the Directors Plan will require the affirmative vote of the majority
of the combined voting power of the shares of Common Stock and Preferred Stock
entitled to vote at the Annual Meeting. However, because Robert Kauffman, The
New World Power Corporation and Programmed Land, Inc. have indicated that they
will vote FOR approval of the Directors Plan, it is expected that Directors Plan
will be approved.
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS
The principal independent public accounting firm utilized by the Company for the
fiscal year ended August 31, 1995, was KPMG Peat Marwick LLP, independent
certified public accountants (the "Auditors"). It is presently contemplated that
the Auditors will be retained as the principal accounting firm to be utilized by
the Company during the current fiscal year. It is anticipated that a
representative of the Auditors will attend the annual meeting for the purpose of
responding to appropriate questions. At the meeting, a representative of the
Auditors will be afforded an opportunity to make a statement if the Auditors so
desire.
PROPOSALS BY SHAREHOLDERS
Any shareholder proposal which is intended to be presented at the Company's 1997
Annual Meeting of Shareholders must be received at the Company's principal
executive offices no later than August 23, 1996, if such proposal is to be
considered for inclusion in the Company's proxy or information statement and any
form of proxy relating to such meeting.
OTHER BUSINESS
The meeting is being held for the purposes set forth in the Notice which
accompanies this Information Statement. The Board of Directors is presently
aware of no business to be transacted at the meeting other than as set forth in
such notice.
PHOTOCOMM, INC.
Donald E. Anderson
Chairman of the Board
Scottsdale, Arizona
December 22, 1995
<PAGE>
EXHIBIT "A"
PHOTOCOMM, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Purposes of the Plan. The purposes of this Plan are to attract and
retain the best available individuals to serve as non-employee members of the
Board of Directors of the Company, to reward such directors for their
contributions to the profitable growth of the Company, and to maximize the
identity of interest between such directors and stockholders generally.
1. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean PHOTOCOMM, INC., an Arizona
corporation.
(c) "Effective Date" shall be the date that the Board of
Directors of the Company adopts this Plan.
(d) "Eligible Director" shall mean (i) those individuals who
are serving as non-employee members of the Board on the Effective Date,
or (ii) those individuals who are elected or appointed as non-employee
members of the Board after the Effective Date, whether through
appointment by the Board or election of the Company's stockholders.
(e) "Exercise Price" shall mean, with respect to Shares of
Optioned Stock, the Fair Market Value of such Shares on the date of
grant of the Option.
(f) "Fair Market Value" shall mean, with respect to the date a
given Option is granted or exercised, the value of the Common Stock
determined by the Board in such manner as it may deem equitable for
Plan purposes; provided, however, that where there is a public market
for the Common Stock, the Fair Market Value per Share shall be the mean
of the bid and asked prices of the Common Stock on the date of grant,
as reported in the Wall Street Journal (or, if not reported, as
otherwise reported by the National Association of Securities Dealers
Automated Quotation System) or, in the event the Common Stock is listed
on the New York Stock Exchange or the American Stock exchange, the Fair
Market Value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street
Journal.
(g) "Option" shall mean a right to purchase Stock, granted
pursuant to the Plan.
(h) "Optioned Stock" shall mean the Stock subject to an Option.
(i) "Optionee" shall mean a non-employee director of the
Company who has been granted an Option.
(j) "Plan" shall mean this Non-Employee Directors Stock Option
Plan.
(k) "Share" shall mean a share of the Stock.
(l) "Stock" shall mean the Common Stock of the Company
described in the Certificate of Incorporation of the Company.
(m) "Stock Option Agreement" shall mean the written agreement
evidencing the grant of an Option.
(n) "Trading Day" shall mean a day on which the Fair Market
Value of the Stock can be determined.
2. Common Stock Subject to the Plan. Subject to increases and
adjustments pursuant to Section 9 of the Plan, the number of Shares reserved and
available for distribution under the Plan shall be one hundred thousand
(100,000). If an Option shall expire or become unexercisable for any reason
without having been exercised in full, the unauthorized Shares covered by the
Option shall, unless the Plan shall have terminated, be available for future
grants of Options.
3. Option Grants.
(a) On the Effective Date, each Eligible Director shall be
granted an Option to purchase 10,000 shares of Stock.
(b) Each individual who first becomes an Eligible Director
after the Effective Date, whether through election by the stockholders
or appointment of the Board, shall automatically be granted at the time
of such initial election or appointment, an Option to purchase 10,000
shares of Stock.
(c) On December 1 of each year (the "Annual Grant Date"),
beginning with December 1, 1996, each individual who is at that time an
Eligible Director shall automatically be granted an Option under the
Plan to purchase an additional 3,000 shares of Stock; provided such
individual (i) has attended 75% of the meetings of the Board held
during the 12-month period immediately preceding the Annual Grant Date,
or (ii) if such individual was appointed or elected as a director
during such 12-month period, he or she has attended 75% of the meetings
of the Board held during his of her term as a director, and (iii) has
attended 75% of the meetings of any Committee of the Board to which
such individual has been appointed as a member during such 12-month
period.
(d) The purchase price of Shares subject to an Option shall be
the Fair Market Value on the date of grant.
(e) Each Option granted pursuant to this Plan shall vest and
become exercisable according to the following schedule, provided that
the Optionee remains an Eligible Director at such vesting date:
Vesting Date Percentage of Shares Vesting
------------ ----------------------------
Date of Grant 25%
First Anniversary of Grant 50%
Second Anniversary of Grant 100%
4. Stockholder Approval. This Plan was adopted by the Board of
Directors of the Company on December 4, 1995 (the "Effective Date"). Options may
be granted under the Plan on and after the Effective Date. The Plan shall be
submitted for stockholder approval at the next annual or special meeting of
stockholders. However, the failure to obtain such approval shall not affect the
effectiveness of the Plan. No Option may be granted after the expiration of ten
(10) years from the effective date of the Plan; provided, however, that the Plan
and all outstanding Options shall remain in effect until such Options shall have
been exercised, shall have expired or shall otherwise be terminated.
5. Term; Exercise; Rights as a Stockholder.
(a) The term of each Option shall be ten (10) years from the
date of grant thereof. To the extent vested the Option may be exercised
in whole or in part at any time and during the term of the Option. No
fractional Shares will be issued upon exercise of the Option and, if
the exercise results in a fractional interest, an amount will be paid
in cash equal to the value of such fractional interest based on the
Fair Market Value of the Shares on the date of exercise.
(b) An Option shall be deemed to be exercised upon receipt by
the Company from the Optionee of written notice of such exercise. Such
notice shall be accompanied by full payment for the Shares subject to
such exercise.
6. Payment. The Exercise Price shall be paid:
(a) In United States dollars in cash or by check payable to the
order of the Company; or
(b) Subject to the approval of the Board, by delivery of Shares
with an aggregate Fair Market Value equal to the Exercise Price; or
(c) By any combination of (a) and (b) above.
The Board shall determine acceptable methods for tendering
Stock as payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Stock to exercise an Option as it deems appropriate.
7. Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and distribution to the limited extent provided
herein or pursuant to a "qualified domestic relations order" as defined by the
Internal Revenue Code or the Employee Retirement Income Security Act or the
rules thereunder. Except as permitted herein, an Option may be exercised, during
the lifetime of the Optionee, only by the Optionee or by his guardian or legal
representative.
In the event of the Optionee's death, his or her Option shall
be exercisable, prior to the expiration of the Option, by the person or persons
to whom his or her accrued and vested rights pass by will or by the laws of
descent and distribution.
8. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, consolidation,
subdivision, stock dividend, combination or reclassification of the Shares, or
any other increase or decrease in the number of issued Shares 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 adjustment by reason thereof shall be made, with
respect to the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, all Options will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each holder the right
to exercise the Option as to all or any part thereof, including Shares as to
which the Option would not otherwise be exercisable. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Option shall be assumed or an
equivalent Option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the holder shall have the right to exercise the Option as to all of the
Shares, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the holder that the Option shall be fully exercisable for a period of 30 days
from the date of such notice (but not later than the expiration of the term of
the Option), and the Option will terminate upon the expiration of such period.
9. Amendment and Termination of the Plan. The Board may amend the Plan
from time to time in such respects as the Board may deem advisable or terminate
the Plan; provided, however, that amendments to the Plan relating to the amount,
price or timing of Option grants shall not be made more than once in any six
month period, other than amendments necessary to comply with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder. Any amendment or termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and effect as if
this Plan had not been amended or terminated.
Notwithstanding the foregoing, revisions or amendments that
accomplish any of the following shall require approval of the stockholders of
the Company, to the extent required by law, rule or regulation:
(a) Materially increase the benefits accruing to participants
under the Plan;
(b) Materially increase the number of Shares which may be
issued under the Plan;
(c) Materially modify the Plan as to eligibility for
participation in the Plan; or
(d) Otherwise cause the Plan to lose its exemption under
Section 16(b) of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
10. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
or market system upon which the Shares may be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may
require the Optionee 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 or advisable.
Inability of the Company to obtain authority from a regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary or advisable 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.
11. Termination of Option.
(a) Termination as a Director. If an Optionee ceases to be a
director, unless such cessation occurs due to death or disability, then
the Option shall terminate on the date thirty days after the date the
Optionee ceases to be a director.
(b) Disability. Unless otherwise provided in the Stock Option
Agreement, in the event an Optionee is unable to continue to be a
member of the Board as a result of his permanent and total disability
(as defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended), he may exercise the Option at any time within twelve (12)
months following the date he ceased to be a director, but only to the
extent he was entitled to exercise it on the date he ceased to be a
director. To the extent that he was not entitled to exercise the Option
on the date he ceased to be a director, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) Death. Unless otherwise provided in the Stock Option
Agreement, if an Optionee dies during the term of the Option, the
Option may be exercised at any time within twelve (12) months following
the date of death, but only to the extent that an Optionee was entitled
to exercise the Option on the date of death. To the extent that
decedent was not entitled to exercise the Option on the date of death,
or if the Optionee's estate, or person who acquired the right to
exercise the Option by bequest or inheritance, does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
12. Option Agreement. Options shall be evidenced by Stock Option
Agreements in such form as the Board shall approve.
13. Miscellaneous Provisions.
(a) Plan Expense. Any expenses of administering this Plan shall
be borne by the Company.
(b) Construction of Plan. The validity, construction,
interpretation, administration and effect of the Plan and of its rules
and regulations, and rights relating to the Plan, shall be determined
by the Board in accordance with the laws of the State of Arizona.
(c) Taxes. The Company shall be entitled if necessary or
desirable to pay or withhold the amount of any tax attributable to the
delivery of Common Shares under the Plan after giving the person
entitled to receive such Shares notice as far in advance as practical,
and the Company may defer making delivery of such Shares if any such
tax may be pending unless and until indemnified to its satisfaction.
(d) Gender. For purposes of this Plan, words used in the
masculine gender shall include the female and neuter, and the singular
shall include the plural and vice versa, as appropriate.
