SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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by Rule 14a- 6(e)(2))
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[ ] Definitive Additional Materials
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12
PCC GROUP, INC.
-----------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Regis
trant)
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PCC GROUP, INC.
163 University Parkway
Pomona, California 91768
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on June 2, 1999
To the Shareholders of PCC Group, Inc.:
Notice is hereby given that the Annual Meeting of
Shareholders of PCC Group, Inc. will be held on Wednesday, June
2, 1999 at 10:00 a.m. local time, at the Company's executive
offices located at 163 University Parkway, Pomona, California
91768 for the following purposes:
1. To approve an amendment to the By-laws to provide that
the authorized number of directors shall be a range from five (5)
to seven (7), with the exact number to be fixed by the Board of
Directors;
2. To elect six directors of the Company to serve until the
next annual meeting of shareholders or until their successors are
duly elected or qualified;
3. To approve an amendment to the Articles of Incorporation
(i) to eliminate the liability of directors for monetary damages
to the fullest extent permissible under California law and (ii)
to authorize the Company to indemnify the directors and officers
to the fullest extent permissible under California law;
4. To approve the adoption of the Company's 1999 Stock
Option Plan;
5. To ratify the appointment by the Board of Directors of
BDO Seidman, LLP as the Company's independent public accountants
for the fiscal year ending September 30, 1999;
6. To transact any other business which may properly come
before the meeting.
Only shareholders of record at the close of business on
Friday, April 30, 1999 are entitled to notice of and to vote at
the meeting and any adjournments thereof.
All shareholders are cordially invited to attend the meeting
in person. Whether or not you expect to attend the meeting to
assure your representation at the meeting, PLEASE COMPLETE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. The giving of your proxy will not affect your right to
vote in person should you later decide to attend the meeting.
By Order of the Board of Directors
PCC GROUP, INC.
Jack Wen
Chief Executive Office and
President
Pomona, California
May 5, 1999
PCC GROUP, INC.
163 University Parkway
Pomona, California 91768
(909) 869-6133
___________________________
PROXY STATEMENT
For the Annual Meeting of Shareholders
To Be Held
June 2, 1999
____________________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of PCC Group,
Inc. ("PCC Group" or the "Company"), for the Annual Meeting of
Shareholders to be held on Wednesday, June 2, 1999 and any
postponements or adjournments thereof (the "Annual Meeting").
The Annual Meeting will be held at the Company's executive
offices located at 163 University Parkway, Pomona, California, at
10:00 a.m. local time. This Proxy Statement and the accompanying
Notice of Annual Meeting and form of Proxy were first mailed to
shareholders on or about May 5, 1999.
Any shareholder giving a proxy may revoke it before it is
voted by notifying the Secretary of PCC Group in writing before
or at the Annual Meeting, by providing a proxy bearing a later
date, or by attending the Annual Meeting and expressing a desire
to vote in person. All proxies will be voted as directed by the
shareholder on the proxy card. If no choice is specified, proxies
will be voted "FOR" the proposal to amend the By-laws, "FOR" the
election of the nominees of the Board of Directors named in this
Proxy Statement, "FOR" the proposal to amend the Articles of
Incorporation, "FOR" the proposal to approve the adoption of the
Company's 1999 Stock Option Plan, and "FOR" the proposal to
ratify the appointment by the Board of Directors of BDO Seidman,
LLP as the Company's independent public accountants for the
fiscal year ending September 30, 1999. It is not expected that
any other matter other than those referred to in this Proxy
Statement will be brought before the Annual Meeting. If,
however, other matters are properly presented, the persons named
as proxies will vote in accordance with their discretion with
respect to such matters. Your cooperation in promptly returning
the enclosed proxy will reduce PCC Group's expenses and enable
its management and employees to continue their normal duties for
your benefit with minimum interruption for follow-up proxy
solicitation.
Only shareholders of record at the close of business on
April 30, 1999 are entitled to receive notice of and to vote at
the Annual Meeting. On that date, PCC Group had outstanding
2,766,339 shares of Common Stock, $.01 par value ("Common
Stock"), each of which is entitled to one vote upon each proposal
presented at the Annual Meeting, except that shareholders may
have cumulative voting rights with respect to the election of
directors. Under the cumulative voting method, a shareholder may
multiply the number of shares owned by the number of directors to
be elected and cast the total number of votes for any one
candidate or distribute the total number of votes in any
proportion among as many candidates as the shareholder desires.
However, a shareholder may not cumulate votes for a candidate
unless such candidate's name has been placed in nomination prior
to the voting and unless a shareholder has given notice at the
Annual Meeting and prior to the voting of his intention to
cumulate his votes. If any shareholder gives such notice, all
shareholders (including those voting by proxy) may then cumulate
their votes. The candidates receiving the highest number of votes
up to the number of directors to be elected will be elected. The
approval of the amendments to the Articles of Incorporation and
By-laws will require the affirmative vote of at least a majority
of the outstanding shares of Common Stock, or at least 1,383,170
shares. Approval of all other proposals will require the
affirmative vote of at least a majority in voting interest of the
shareholders present in person or by proxy at the Annual Meeting.
The presence at the Annual Meeting, either in person or by
proxy, of the holders of a majority of the shares of Common Stock
outstanding on the record date is necessary to constitute a
quorum for the transaction of business. Abstention and broker non-
votes (which occur if a broker or other nominee does not have
discretionary authority and has not received voting instructions
from the beneficial owner with respect to the particular item)
are counted for purposes of determining the presence or absence
of a quorum for the transaction of business. Abstentions and
broker non-votes will be counted as not voting for purposes of
determining the approval of any matter submitted to the
shareholders for a vote.
If sufficient votes in favor of the proposals are not
received by the date of the Annual Meeting, the persons named as
proxies may propose one or more adjournments of the Annual
Meeting to permit further solicitations of proxies. Any such
adjournment will require the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by
proxy at the Annual Meeting. The persons named as proxies will
vote in favor of such adjournment.
The cost of preparing, assembling and mailing this Proxy
Statement, the Notice of Annual Meeting and the enclosed form of
Proxy, as well as the cost of soliciting proxies relating to the
Annual Meeting, will be borne by PCC Group. The original
solicitation of proxies by mail may be supplemented by telephone,
telegraph and personal solicitation by officers and other regular
employees of PCC Group, but no additional compensation will be
paid to such individuals on account of such activities. PCC Group
will reimburse banks, brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to their principals.
PROPOSAL TO AMEND THE BY-LAWS
On April 8, 1999, the Board of Directors approved, subject
to shareholder approval, an amendment to Article II, Section 4 of
the Company's By-laws that changed the number of directors of the
Company's Board of Directors from a fixed number of five (5) to a
range from five (5) to seven (7). The Board of Directors
believes that an increase in the number of authorized Board
members will allow the Company to recruit additional qualified
directors who can supplement the skills and experience of the
existing directors. If the shareholders approve this amendment
to the By-laws, the Board of Directors has resolved to initially
fix the directors at six (6).
The current language of Article II, Section 5 is as follows:
The authorized number of Directors shall be five (5) until
changed by a duly adopted amendment to the Articles of
Incorporation or by amendment to this by-law adopted by the vote
or written consent of holders of a majority of the outstanding
shares entitled to vote, as provided in Sec. 212.
The Board of Directors is proposing to amend the language of
Article II, Section 4 as follows:
The authorized number of Directors shall be a range of five
(5) to seven (7), with the exact number to be fixed by the Board.
This range may be changed by amendment to the Articles of
Incorporation or by an amendment to this by-law adopted by the
vote or written consent of the holders of a majority of the
outstanding shares entitled to vote, as provided in Sec. 212.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDMENT OF THE BY-LAWS
ELECTION OF DIRECTORS
Nominees and Voting
The By-laws of the Company currently provide for five
directors; however, a proposal on the agenda of this Annual
Meeting is to amend Article II, Section 4 of the By-laws such
that the authorized number of directors shall be a range of five
(5) to seven (7), with the initial number fixed at six (6). The
Board of Directors will present six nominees for election as
directors; however, in the event the proposal to increase the
authorized number of directors is not approved by a majority of
shareholders, only the five nominees receiving the largest number
of shareholder votes will be elected directors.
The Board of Directors has nominated for election as
directors Jack Wen, Gary Blum, George Rodda, Jr. (all of whom are
incumbent directors), J. L. Yin, Donald Johnson and Richard
Huang. All of these nominees have indicated that they are able
and willing to serve as directors. All directors will be elected
to hold office until the next Annual Meeting and until their
respective successors are elected and qualified.
Management proxies will be voted "FOR" the election of all
of the above named nominees unless the shareholder indicates that
the proxy shall not be voted for all or any one of the nominees.
Proxies cannot be voted for a greater number of persons than the
number of nominees named. If for any reason any nominee should,
prior to the Annual Meeting, become unavailable for election as a
director, an event not now anticipated, the proxies will be voted
for such substitute nominee, if any, as may be recommended by
management.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE SIX PERSONS NOMINATED FOR DIRECTOR HEREIN
Management of the Company
The following table sets forth certain information as of
April 30, 1999 with respect to the Board's current directors, all
of whom are nominees, and new nominees:
Executive Officers,
Directors, and Director
Nominees Age Position with the Company
Jack Wen 44 Chairman of the Board, Chief
Executive Officer, and President
Gary Blum 58 Director
George Rodda, Jr. 68 Director
J. L. Yin 47 Vice President and Director Nominee
Donald Johnson 62 Vice President of Finance, Chief
Financial Officer, and Director
Nominee
Richard Huang 49 Vice President of Engineering and
Director Nominee
Business Experience of Directors During the Past Five Years
Jack Wen has served as PCC Group's Chairman of the Board, Chief
Executive Officer and President since October 1989. He is the
brother of J. L. Yin.
Gary Blum has been a director of PCC Group since 1992. Mr. Blum
is the principal of the Law Offices of Gary L. Blum, Los Angeles,
California, which he founded in June 1988. Mr. Blum currently
serves as a director of Digitran Systems, Incorporated, a
publicly held company specializing in the manufacturing and
marketing of simulator training devices. He received J. D. and
M.B.A. degrees from the University of Southern California.
George Rodda, Jr. has been a director of PCC Group since 1995.
Mr. Rodda is an attorney with offices in Newport Beach and
Washington, D.C. Mr. Rodda founded WMD Micro Distributors, Inc.,
the predecessor corporation to the Company, in 1983. He is also a
director of Bagdad Chase, Inc., a public company which owns mines
in California and Idaho.
J. L. Yin has served as a Vice President of the Company since
1991, and since December 1998, and currently is the President of
Computer Discount Center, Inc., a wholly owned subsidiary of the
Company. From 1987 to 1991 she was Managing Director of PCCraft
GmbH; and she was the Executive Manager of E.O. International, a
Taiwanese manufacture and distributor of computer and electronic
products from 1982 until 1987. Ms. Yin is a graduate of Wen Tzao
Ursula College and Fu Jen University. She is the sister of Jack
Wen.
Donald Johnson, Vice President of Finance and Chief Financial
Officer, joined PCC Group in 1998. Previously, since 1994, he
had an accounting and business management consulting practice
with Business Management Services, a financial and management
consulting firm. From 1990 to 1994 he served as Vice President
of Finance for Vector Aeromotive Corporation, a publicly traded
company producing an exotic sports car. From 1973 to 1990 Mr.
Johnson was Treasurer and Chief Financial Officer for ACL
Technologies, a manufacturer of aircraft and hydraulic testing
systems. Mr. Johnson received a B.S. from California State
University at Los Angeles and an M.B.A. from Pepperdine
University.
Richard Huang, Vice President of Engineering, joined PCC Group in
1996 and is responsible for domestic and international project
management. Formerly, he served as a consultant for Premier
Technology, Inc. (1992-96), as Senior Mechanical Engineer for
Brown & Root Braun, Inc. (1989-92), as Senior Mechanical Engineer
for Bechtel Power Co. (1987-89), and as Engineering Group
Supervisor for Pacific Engineers and Contractors Ltd. (1983-87).
Mr. Huang obtained a Ph.D. in Mechanical Engineering from
Maryland State University and an M.S. degree from National Chen-
Kong University, Taiwan.
Meetings of the Board of Directors and Committees
PCC Group's Board of Directors met seven times during fiscal
1998. All directors were present at each meeting. PCC Group
maintains Compensation, Nominating and Audit Committees. The
Compensation Committee currently consists of Mr. Wen and Mr.
Blum. The Nominating and Audit Committees currently consist of
Mr. Blum and Mr. Rodda.
The Compensation Committee sets the compensation policies
applicable to PCC Group's executive officers, determines the
compensation of the executive officers, subject to review by the
Board of Directors and administers PCC Group's employee stock
option plan and stock bonus plan. Currently the Nominating
Committee has no specific policy regarding nominees recommended
by shareholders. In the event a shareholder submits a nominee,
the Nominating Committee will review the background of such
nominee and respond appropriately following such review. The
Audit Committee recommends the engagement of the Company's
independent auditors and reviews with them the plan and scope of
their audit for each year, the results of such audit when
completed, and their fees for services performed. Each of such
Committees met once during fiscal 1998 and all members were
present.
Compensation of Directors
Directors of the Company do not receive cash compensation
for their services as Directors or members of committees of the
Board of Directors, but are reimbursed for their reasonable
expenses incurred in attending meetings of the Board of
Directors.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
In April 1999, the Company's Board of Directors unanimously
approved the amendment of the Company's Articles of
Incorporation, subject to the approval of the shareholders, to
add a new Article V to read as follows:
"The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent
permissible under California law. The corporation is authorized
to indemnify the directors and officers of the corporation to the
fullest extent permissible under California law."
The foregoing amendment to the Articles of Incorporation
contains the language suggested by the California Secretary of
State for all new corporations. This provision is intended to
eliminate the personal liability of a director for monetary
damages in an action brought by, or in the right of, the Company
for breach of a director's duties to the Company or its
shareholders. This provision in the Articles does not eliminate
the directors' fiduciary duty and does not apply to certain
liabilities: (i) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law; (ii) for
acts or omissions that a director believes to be contrary to the
best interest of the Company or its shareholders or that involve
the absence of good faith on the part of the director; (iii) for
any transaction from which a director derived an improper
personal benefit; (iv) for acts or omissions that show a reckless
disregard for the director's duty to the Company or its
shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the Company or
its shareholders; (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Company or its shareholders; (vi) with
respect to certain transactions or the approval of transactions
in which a director has a material financial interest; and (vii)
expressly imposed by statute for approval of certain improper
distributions to shareholders or certain loans or guarantees.
This provision also does not limit or eliminate the rights of the
Company or any shareholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's
duty of care.
Section 317 of the California Corporations Code ("Section
317") provides that a California corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other
than action by or in the right of the corporation) by reason of
the fact that he is or was a director, officer, employee or agent
of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no cause to
believe his conduct was unlawful. Section 317 also provides that
a California corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth
above, against expenses actually and reasonably incurred by him
in connection with the defense or settlement of such action or
suit if he acted under similar standards, except that no
indemnification may be made in respect to any claim, issue or
matter as to which such persons shall have been adjudged to be
liable to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine
that despite the adjudication of liability, such person is fairly
and reasonably entitled to be indemnified for such expenses which
the court shall deem proper. Section 317 provides further that
to the extent a director or officer of a California corporation
has been successful in the defense of any action, suit or
proceeding referred to in the previous paragraphs or in the
defense of any claim, issue or matter therein, he shall be
indemnified against expenses actually and reasonably incurred by
him in connection therewith; that indemnification authorized by
Section 317 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability
asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities
under Section 317.
The Company believes that the provisions to be added to the
Articles of Incorporation are standard provisions of
substantially all newer California corporations. These
provisions merely recite the legal protections that are
explicitly authorized by the California Corporations Code as
being available to officers and directors of California
corporations. The Company believes that in order to retain its
current directors and to recruit new directors, its Articles of
Incorporation should contain the limitation of liability clauses
that the Company believes are standard for most California
corporations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDMENT OF THE ARTICLES OF INCORPORATION
PROPOSAL TO ADOPT THE COMPANY'S 1999 STOCK OPTION PLAN
In April 1999, the Company's Board of Directors unanimously
approved the Company's 1999 Stock Option Plan (the "1999 Plan").
The purpose of the 1999 Plan is to enable the Company to attract
and retain top-quality employees, officers, directors and
consultants and to provide such employees, officers, directors
and consultants with an incentive to enhance shareholder returns.
The full text of the 1999 Plan appears as Exhibit A to this Proxy
Statement and the description of the 1999 Plan herein is
qualified by reference to Exhibit A.
The 1999 Plan was adopted by the Board of Directors to
supplement the Company's existing 1992 Incentive Stock Option
Plan, under which there remains only 100,000 shares available for
issuance and the Company's existing 1992 Bonus Stock Option Plan,
under which there remains only 200,000 shares available for
issuance.. The Board of Directors believes that, in order to
attract qualified employees, officers, consultants and directors
to the Company and to provide incentives to its current
employees, officers, consultants and directors, it is necessary
to be able to grant options to purchase Common Stock to such
persons. The Company expects to continue to grant options under
its existing stock option plan until all options available
thereunder have been granted and, thereafter, to the extent
appropriate, to grant options under the new plan.
Description of the 1999 Plan
The 1999 Plan provides for the grant to directors, officers,
employees and consultants of the Company (including its
subsidiaries) of options to purchase up to an aggregate of
250,000 shares of Common Stock. The 1999 Plan may be
administered by the Board of Directors or a committee of the
Board of Directors (in either case, the "Committee"), which has
complete discretion to select the optionees and to establish the
terms and conditions of each option, subject to the provisions of
the 1999 Plan. Options granted under the 1999 Plan may be
"incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified options.
The exercise price of incentive stock options may not be
less than 100% of the fair market value of the Common Stock as of
the date of grant (110% of the fair market value if the grant is
to an employee who owns more than 10% of the total combined
voting power of all classes of capital stock of the Company).
The Code currently limits to $100,000 the aggregate value of
Common Stock that may be acquired in any one year pursuant to
incentive stock options under the 1999 Plan or any other option
plan adopted by the Company. Nonqualified options may be granted
under the 1999 Plan at an exercise price of not less than 85% of
the fair market value of the Common Stock on the date of grant.
Nonqualified options also may be granted without regard to any
restriction on the amount of Common Stock that may be acquired
pursuant to such options in any one year.
Subject to the limitations contained in the 1999 Plan,
options granted under the 1999 Plan will become exercisable at
such times and in such installments as the Committee shall
provide in the terms of each individual stock option agreement.
The Committee must also provide in the terms of each stock option
agreement when the option expires and becomes unexercisable, and
may also provide the option expires immediately upon termination
of employment for any reason.
Unless otherwise provided in the applicable stock option
agreement, upon termination of employment of an optionee, all
options that were then exercisable would terminate three months
(six months in the case of termination by reason of death or
disability) following termination of employment. Any options
which were not exercisable on the date of such termination would
immediately terminate concurrently with the termination of
employment.
The Board of Directors may at any time amend, alter, suspend
or terminate the Plan. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any optionee,
unless mutually agreed otherwise between the optionee and the
Committee, which agreement must be in writing and signed by the
optionee and the Company. Termination of the Plan will not
affect the Committee's ability to exercise the powers granted to
it hereunder with respect to options granted under the Plan prior
to the date of such termination.
Options granted under the 1999 Plan may not be exercised
more than ten years after the grant (five years after the grant
if the grant is an incentive stock option to an employee who owns
more than 10% of the total combined voting power of all classes
of capital stock of the Company). Options granted under the 1999
Plan are not transferable and may be exercised only by the
respective grantees during their lifetime or by their heirs,
executors or administrators in the event of death. Under the 1999
Plan, shares subject to cancelled or terminated options are
reserved for subsequently granted options. The number of options
outstanding and the exercise price thereof are subject to
adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends. The 1999 Plan
is effective for ten years, unless sooner terminated or
suspended.
Certain Federal Income Tax Consequences
Incentive stock options granted under the 1999 Plan will be
afforded favorable federal income tax treatment under the Code.
If an option is treated as an incentive stock option, the
optionee will recognize no income upon grant or exercise of the
option unless the alternative minimum tax rules apply. Upon an
optionee's sale of the shares (assuming that the sale occurs at
least two years after grant of the option and at least one year
after exercise of the option), any gain will be taxed to the
optionee as long-term capital gain. If the optionee disposes of
the shares prior to the expiration of the above holding periods,
then the optionee will recognize ordinary income in an amount
generally measured as the difference between the exercise price
and the lower of the fair market value of the shares at the
exercise date or the sale price of the shares. Any gain or loss
recognized on such a premature sale of the shares in excess of
the amount treated as ordinary income will be characterized as
capital gain or loss.
All other options granted under the 1999 Plan will be
nonstatutory stock options and will not qualify for any special
tax benefits to the optionee. An optionee will not recognize any
taxable income at the time he or she is granted a nonstatutory
stock option. However, upon exercise of the nonstatutory stock
option, the optionee will recognize ordinary income for federal
income tax purposes in an amount generally measured as the excess
of the then fair market value of each share over its exercise
price. Upon an optionee's resale of such shares, any difference
between the sale price and the fair market value of such shares
on the date of exercise will be treated as capital gain or loss
and will generally qualify for long-term capital gain or loss
treatment if the shares have been held for more than one year.
Recently enacted legislation provides for reduced tax rates for
long-term capital gains based on the taxpayer's income and the
length of the taxpayer's holding period.
The foregoing does not purport to be a complete summary of
the federal income tax considerations that may be relevant to
holders of options or to the Company. It also does not reflect
provisions of the income tax laws of any municipality, state or
foreign country in which an optionee may reside, nor does it
reflect the tax consequences of an optionee's death..
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ADOPTION OF THE 1999 STOCK OPTION PLAN
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the accounting firm of
BDO Seidman to serve as independent auditors for the current
fiscal year, subject to ratification by the shareholders. BDO
Seidman has served as the Company's independent auditors since
October 1993. It is anticipated that representatives of BDO
Seidman will be present at the Annual Meeting, and such
representatives will be given the opportunity to make a
statement, if they so desire, and to answer appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION
OF THE INDEPENDENT PUBLIC ACCOUNTANTS
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of April 30,
1999, certain information with respect to (i) each person who is
known by PCC Group to be the beneficial owner of more than five
percent (5%) of the outstanding Common Stock, (ii) each director
of PCC Group, (iii) the executive officer named in the Summary
Compensation Table in this Proxy Statement and (iv) all directors
and executive officers as a group. Unless otherwise indicated,
the address for each of the persons listed below is care of the
Company, 163 University Parkway, Pomona, California 91768.
Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Owner Shares Outstanding
Jack Wen 667,337(1) 22.1%
Gary Blum 1,700 0.1%
George Rodda, Jr. 152,650(2) 5.4%
Rita Wen (formerly Rita Soong) 338,381 12.2%
Jennifer Wen 157,911 5.7%
J.L. Yin (also known as Tina Wen) 451,175 16.3%
All Directors, Director Nominees,
and Executive Officers as a Group
(6 persons) 1,272,862(3) 41.4%
- --------------------------------
(1) Includes 416,837 shares held by Mr. Wen individually, and
includes 250,000 shares underlying presently exercisable stock
options. The above amount excludes (a) 157,911 shares owned by
Jennifer Wen, Mr. Wen's wife, (b) 338,381 shares owned by Rita
Wen, Mr. Wen's sister, and (c) 451,175 shares owned by J.L. Yin,
Mr. Wen's sister. Mr. Wen disclaims beneficial ownership of
these shares.
(2) Includes 60,000 shares underlying presently exercisable
stock options.
(3) Includes 310,000 shares underlying presently exercisable
stock options.
EXECUTIVE COMPENSATION
Compensation Summary
The following table sets forth the compensation paid to PCC
Group's Chief Executive Officer for services rendered in all
capacities to PCC Group for the fiscal years ended September 30,
1998, 1997 and 1996. No other executive officer received
compensation in excess of $100,000 for such periods.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Awards
Securities
Name and Other Annual Underlying
Principal Position Year Salary Compensation Options
Jack Wen 1998 $120,000 $16,720 (1)
Chairman of the
Board, Chief 1997 $120,000 $27,722 (1)
Executive
Officer and
President 1996 $120,000 $18,757 (1) 250,000
- ---------------------------
(1) Consists solely of lease payments and insurance for a
company car which has been provided for Mr. Wen's use.
Option Grants and Exercises in Fiscal 1998
No stock options were exercised by or granted to the Chief
Executive Officer during fiscal 1998.
Fiscal Year-End Option Values
The following table provides information with respect to
stock options held by the Chief Executive Officer:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES TABLE
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End(1)
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisible Unexercisible
Jack Wen --- --- 250,000 --- $865,912.50 ---
- ------------------------
(1) Value is determined by subtracting the exercise price from
the fair market value (the closing price for Common Stock as
reported by Nasdaq) as of September 30, 1998, the last trading
day in the fiscal year ($4.750 per share), and multiplying the
resulting number by the number of underlying shares of Common
Stock.
Compensation Committee Report on Executive Compensation
The Compensation Committee (the "Committee") of the Board of
Directors has prepared the following report (the "Report") for
inclusion in this Proxy Statement.
Compensation Policy for Executive Officer. The policy of the
Committee is to provide each executive officer current cash
compensation that is reasonable and consistent with PCC Group's
size, industry and performance, and long-term incentive
compensation based on the performance of the Company's Common
Stock and the achievement of long term goals. Through the fiscal
year ended September 30, 1998, the Committee had not established
the relative weight of any of the performance factors discussed
below. The Committee has relied heavily on the recommendations of
Mr. Wen in setting the compensation of the other executive
officers.
Compensation for Executive Officers. The salary of each of the
executive officers is based on his or her level of responsibility
and contribution to PCC Group's performance and reflect any
annual discretionary increases or decreases based primarily on
performance factors. The Committee believes that the salaries of
the executive officers are comparable to the salaries of
executives with similar responsibilities at similarly situated
companies, but has not formally studied the policies of other
companies. PCC Group did not award bonuses to any executive
officer for the fiscal year ended September 30, 1998.
Compensation of Chief Executive Officer. As with the other
executive officers, Mr. Wen's compensation in fiscal 1998 was
linked to his individual performance and the Company's
performance. Mr. Wen's compensation consisted solely of his base
salary and the use of a company car. The Committee believes that
Mr. Wen's salary is at or below the salaries of other senior
executives of similarly situated companies, but has not formally
studied the policies of other companies. However, in setting Mr.
Wen's annual salary, the Committee considered the number of
shares and stock options owned by Mr. Wen.
Stock Option Plan. The Committee believes that basing a portion
of the compensation of executive officers and other key employees
on increases in the value of PCC Group Common Stock harmonizes
the interests of the executives and the shareholders and is in
the best interests of the shareholders. PCC Group's stock option
plan is designed to accomplish this purpose. The Company did not
award stock options to any employees or executive officers for
the fiscal year ended September 30, 1998. However, the Committee
intends to utilize stock option grants in the future to provide
additional incentives to PCC Group's officers and employees.
Stock Bonus Plan. The Committee believes that the Company's
Stock Bonus Plan provides a mechanism for rewarding employees for
past services as well as encouraging employees to make
significant extraordinary contributions to the long-term
performance and growth of PCC Group. PCC Group did not, however,
award stock bonuses to any of its executive officers during
fiscal 1998.
The Compensation Committee
Jack Wen
Gary Blum
Compensation Committee Interlocks and Insider Participation
Mr. Wen (PCC Group's Chief Executive Officer and President) and
Mr. Blum (a non-employee director of PCC Group) served on the
Compensation Committee of PCC Group during the past fiscal year.
Certain Transactions
During 1992, the Company sold its 51% interest (51,000
shares) in an apparel company (PCC International Marketing, a
California corporation, "PCCIM") to J.L. Yin (also known as Tina
Wen), a sister of Jack Wen, for $408,000, which consisted of
$204,400 in cash and a note receivable in the amount of
$204,400. In connection with the sale, the Company entered into a
management agreement to provide certain management, accounting,
and
administrative support services to this corporation. The note
receivable, which is collateralized by the shares of PCCIM which
were purchased from the Company, bears interest at 8% per annum.
The principal balance and accrued interest thereon was originally
due June 30, 1994; however, the Company agreed to extend the due
date to June 30, 1995. Subsequently, the due date was extended to
December 30, 1996 and then to June 30, 1997. As of September 30,
1997 the outstanding balance on this note receivable was
$100,000. The foregoing promissory note was repaid in full
during fiscal 1998.
During the past few years, PCC Group has invested its excess
cash in highly liquid securities of other public companies.
During June 1998, the Company sold its entire portfolio of such
securities to Laser Micro System, a Taiwan based corporation
owned by Bin Wen, father of Jack Wen (the Company's Chairman,
Chief Executive Officer, and President) in exchange for a one
year, $1,250,000 secured promissory note. The note was secured
by a lien on the transferred securities and by the 250,000 shares
of the Company's Series A preferred stock owned by the Buyer.
The note bore interest at an annual rate of 8.5%. Interest on
the note was payable quarterly, and the entire unpaid balance was
due on June 20, 1999. On March 19, 1999, Laser Micro prepaid the
note in its entirety.
During fiscal 1998, PCC Group made sales to related parties
totaling $2,693,628 and made purchases from related parties
totaling $2,182,756.
PCC Group has an outstanding loan with a related party in
the amount of $54,017. This loan represents an advance made by
the Company to Laser Micro during the fiscal year ended September
30, 1997. The advance was made in connection with tire recycling
equipment purchased for a tire recycling plant that the Company
had invested in. Laser Micro is disputing its obligation to
repay the advance. The Company anticipates that this advance
will either be repaid or compromised during the current fiscal
year.
PCC Group also has an open account receivable from a related
party of $1,494,355, which represents amounts owed to the Company
by Computer Management Corp. ("CMC"), which is owned by Mr. Wen's
sister. The $1,494,355 amount represents only the outstanding
balance as of September 30, 1998.
Performance Graph
The following graph compares the cumulative shareholder return on
PCC Group's Common Stock from September 30, 1993 through
September 30, 1998, based on the market price of the Common
Stock, with the cumulative total return of the NASDAQ Market
Index and a Peer Group Index comprised of the following companies
engaged in the sale or distribution of microcomputer products:
Arrow Electronics Inc., Avnet Inc., Gates/FA Distributing, Liuski
International, Inc., Marshall Industries, SED International
Holdings, Inc., Savoir Technology Group, Inc., Tech Data Corp.,
and United Stationers Inc. The graph assumes that the value of
the investment in PCC Group's Common Stock and each index was
$100 on September 30, 1993, and that any and all dividends were
reinvested. The comparisons in this table are not intended to
forecast or be indicative of possible future price performance.
[GRAPHIC OMITTED]
9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
- -----------------------------------------------------------------------------
PCC Group, Inc. 100.0 47.2 69.4 219.0 147.0 228.0
Nasdaq Stock Market 100.0 100.8 139.3 165.2 226.8 231.8
Peer Group Index 100.0 94.9 128.5 127.1 178.4 126.9
- -----------------------------------------------------------------------------
MISCELLANEOUS
Section 16(a) Beneficial Ownership Report in Compliance
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% of the Company's Common Stock, to
file reports of ownership and changes in ownership of the Common
Stock with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% shareholders are
required by Securities and Exchange Commission regulations to
furnish PCC Group with copies of all Section 16(a) forms they
file. Based solely on a review of copies of such reports and
written representations from the reporting persons, the Company
believes that, during the period from October 1, 1997 through
September 30, 1998, its executive officers, directors and greater
than 10% shareholders have filed on a timely basis all reports
required under Section 16(a),except for the following: on
February 9, 1999, Gary L. Blum filed a Form 4 reporting
transactions occurring in May 1998 and January 1999.
Proposals of Shareholders
Shareholder proposals submitted for inclusion in the
Company's Proxy Statement and form of proxy relating to the
Company's 2000 Annual Meeting of Shareholders must be received by
January 5, 2000. If the Company is not notified of a shareholder
proposal by March 20, 2000, then the proxies held by management
of the Company may provide the discretion to vote against such
shareholder proposal, even though such proposal is not discussed
in the Proxy Statement. Shareholder proposals should be
submitted to the Secretary, PCC Group, Inc., 163 University
Parkway, Pomona, CA 91768.
Other Matters
The Company knows of no other matters that are likely to be
brought before the Annual Meeting. If, however, other matters
not now known or determined properly come before the Annual
Meeting, the persons named as proxies in the enclosed proxy card
or their substitutes will vote such proxy in accordance with
their discretion with respect to such matters.
Annual Report on Form 10-K
A copy of the Company's combined Annual Report to
Shareholders and Annual Report on Form 10-K for the year ended
September 30, 1998 accompanies this Proxy Statement. An
additional copy will be furnished without charge to beneficial
shareholders or shareholders of record upon request to the
Secretary, PCC Group, Inc., 163 University Parkway, Pomona, CA
91768.
PCC GROUP, INC.
Proxy For Annual Meeting of Shareholders
This Proxy Is Solicited on Behalf of the Board of Directors
of Creative Master International, Inc.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement and hereby
revokes all prior proxies and appoints Jack Wen and Don Johnson
(the "Proxies"), and each of them, with full power of
substitution, as the proxy of the undersigned to represent the
undersigned and to vote all shares of Common Stock of PCC Group,
Inc. which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders, to be
held on June 2, 1999, at 163 University Parkway, Pomona,
California, 91768, and at any adjournments thereof.
1. AMENDMENT OF THE BY-LAWS
Approval of an amendment to the By-laws to provide that the
authorized number of directors shall be a range from five (5)
to seven (7), with the exact number to be fixed by the Board.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF SIX DIRECTORS
Election of six directors, each to hold office until his or
her successor shall have been elected or qualified.
Nominees: Jack Wen, Gary Blum, George Rodda, Jr., J.L. Yin,
Donald Johnson, and Richard Huang. Instruction: To withhold
authority to vote for any nominee write that nominee's name
in this space. _____________________________
[ ] FOR the nominees listed above [ ] WITHHOLD AUTHORITY
except as indicated above to vote for all nominees
3. AMENDMENT OF THE ARTICLES OF INCORPORATION
Approval of an amendment to the Articles of Incorporation to
eliminate the liability of directors for monetary damages to
the fullest extent permissible under California law and to
authorize the Company to indemnify the directors and officers
to the fullest extent permissible under California law.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 1999 STOCK OPTION PLAN
Approval of the adoption of the Company's 1999 Stock Option
Plan.
5. INDEPENDENT PUBLIC ACCOUNTANTS
Ratification of the appointment of BDO Seidman, LLP as the
Company's independent public accountants for the fiscal year
ending September 30, 1999
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. Unless direction
is given, this proxy will be voted "FOR" the proposal to amend
the By-laws, "FOR" the election of the nominees of the Board of
Directors named in this Proxy Statement, "FOR" the proposal to
amend the Articles of Incorporation, "FOR" the proposal to
approve the adoption of the Company's 1999 Stock Option Plan, and
"FOR" the proposal to ratify the appointment by the Board of
Directors of BDO Seidman, LLP as the Company's independent public
accountants for the fiscal year ending September 30, 1999.
Please sign below exactly as your name appears on the Proxy Card.
If shares are registered in more than one name, the signatures of
all such persons are required. A corporation should sign in its
full corporate name by a duly authorized officer, stating his/her
title. Trustees, guardians, executors, and administrators should
sing in their official capacity, giving their full title as such.
If a partnership, please sign in the partnership name by
authorized person(s).
Signature(s)_______________________________________ Date________________
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
EXHIBIT A
1999 STOCK OPTION PLAN
OF
PCC GROUP, INC.
1. PURPOSES OF THE PLAN
The purposes of the 1999 Stock Option Plan (the "Plan") of
PCC Group, Inc., a California corporation (the "Company"), are
to:
(a) Encourage selected employees,
directors and consultants to improve operations and increase
profits of the Company;
(b) Encourage selected employees,
directors and consultants to accept or continue employment or
association with the Company or its Affiliates; and
(c) Increase the interest of selected
employees, directors and consultants in the Company's welfare
through participation in the growth in value of the common stock
of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be
"incentive stock options" ("ISOs") intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986,
as amended, and the regulations thereunder (the "Code"), or
"nonqualified options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is an
employee of the Company or of any Affiliate (as defined below) of
the Company is eligible to receive NQOs or ISOs under this Plan.
Every person who at the date of grant is a consultant to, or non-
employee director of, the Company or any Affiliate (as defined
below) of the Company is eligible to receive NQOs under this
Plan. The term "Affiliate" as used in the Plan means a parent or
subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code.
The term "employee" includes an officer or director who is an
employee of the Company. The term "consultant" includes persons
employed by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan, the
total number of shares of stock which may be issued under Options
granted pursuant to this Plan shall not exceed 250,000 shares of
Common Stock. The shares covered by the portion of any grant
under the Plan which expire unexercised shall become available
again for grants under the Plan.
4. ADMINISTRATION
(a) The Plan shall be administered by the
Board of Directors of the Company (the "Board") or by a committee
(the "Committee") to which administration of the Plan, or of part
of the Plan, is delegated by the Board (in either case, the
"Administrator"). The Board shall appoint and remove members of
the Committee in its discretion in accordance with applicable
laws. If necessary in order to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Section 162(m) of the Code, the Committee shall, in the
Board's discretion, be comprised solely of "non-employee
directors" within the meaning of said Rule 16b-3 and "outside
directors" within the meaning of Section 162(m) of the Code. The
foregoing notwithstanding, the Administrator may delegate
nondiscretionary administrative duties to such employees of the
Company as it deems proper, and the Board, in its absolute
discretion, may at any time and from time to time exercise any
and all rights and duties of the Administrator under the Plan.
(b) Subject to the other provisions of
this Plan, the Administrator shall have the authority, in its
discretion to: (i) grant Options; (ii) determine the fair market
value of the Common Stock subject to Options; (iii) determine the
exercise price of Options granted; (iv) determine the persons to
whom, and the time or times at which, Options shall be granted,
and the number of shares subject to each Option; (v) interpret
this Plan; (vi) prescribe, amend, and rescind rules and
regulations relating to this Plan; (vii) determine the terms and
provisions of each Option granted (which need not be identical),
including but not limited to, the time or times at which Options
shall be exercisable; (viii) modify or amend any Option with the
consent of the optionee; (ix) defer (with the consent of the
optionee) the exercise date of any Option, (x) authorize any
person to execute on behalf of the Company any instrument
evidencing the grant of an Option; and (xi) make all other
determinations deemed necessary or advisable for the
administration of this Plan. The Administrator may delegate
nondiscretionary administrative duties to such employees of the
Company as it deems proper.
(c) All questions of interpretation,
implementation, and application of this Plan shall be determined
by the Administrator. Such determinations shall be final and
binding on all persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under
this Plan after ten years from the date the Board adopts this
Plan.
(b) Each Option shall be evidenced by a
written stock option agreement, in form satisfactory to the
Administrator, executed by the Company and the person to whom
such Option is granted.
(c) The stock option agreement shall
specify whether each Option it evidences is an NQO or an ISO.
(d) Subject to Section 6.3.3 with respect
to ISOs, the Administrator may approve the grant of Options under
this Plan to persons who are expected to become employees,
directors or consultants of the Company, but are not employees,
directors or consultants at the date of approval, and the date of
approval shall be deemed to be the date of grant unless otherwise
specified by the Administrator.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the
terms and conditions set forth in Section 6.1. NQOs shall be
also subject to the terms and conditions set forth in Section 6.2
but not those set forth in Section 6.3. ISOs shall also be
subject to the terms and conditions set forth in Section 6.3 but
not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject.
All Options granted under this Plan shall be subject to the
following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to
Section 6.1.2, if the stock of the Company is changed by reason
of a stock split, reverse stock split, stock dividend, or
recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board in (a) the number and
class of shares of stock subject to this Plan and each Option
outstanding under this Plan, and (b) the exercise price of each
outstanding Option; provided, however, that the Company shall not
be required to issue fractional shares as a result of any such
adjustments. Each such adjustment shall be subject to approval
by the Board in its sole discretion.
6.1.2 Corporate Transactions. In the event of a
Corporate Transaction (as defined below), the Administrator shall
notify each optionee as soon as practicable. To the extent not
previously exercised, all Options shall terminate immediately
prior to the consummation of such Corporate Transaction unless
the Administrator determines otherwise in its sole discretion;
provided, however, that the Administrator, in its sole
discretion, may permit exercise of any Options prior to their
termination, even if such Options would not otherwise have been
exercisable. A "Corporate Transaction" means a liquidation or
dissolution of the Company, a merger or consolidation of the
Company with or into another corporation or entity, a sale of all
or substantially all of the assets of the Company, or a purchase
of more than 50 percent of the outstanding capital stock of the
Company, after approval by the Board, in a single transaction or
a series of related transactions by one person or more than one
person acting in concert.
6.1.3 Time of Option Exercise. Subject to Section 5
and Section 6.3.4, Options granted under this Plan shall be
exercisable (a) in accordance with a schedule as may be set by
the Administrator (in any case, the "Vesting Base Date") and
specified in the written stock option agreement relating to such
Option, or (b) if no such schedule is set forth in the written
stock option agreement, immediately as of the effective date of
the stock option agreement granting the Option. In any case, no
Option shall be exercisable until a written stock option
agreement in form satisfactory to the Company is executed by the
Company and the optionee.
6.1.4 Option Grant Date. The date of grant of an
Option under this Plan shall be the date as of which the
Administrator approves the grant.
6.1.5 Nontransferability of Option Rights. Except
with the express written approval of the Administrator which
approval the Administrator is authorized to give only with
respect to NQOs, no Option granted under this Plan shall be
assignable or otherwise transferable by the optionee except by
will or by the laws of descent and distribution. During the life
of the optionee, an Option shall be exercisable only by the
optionee.
6.1.6 Payment. Except as provided below, payment in
full, in cash, shall be made for all stock purchased at the time
written notice of exercise of an Option is given to the Company,
and proceeds of any payment shall constitute general funds of the
Company. The Administrator, in the exercise of its absolute
discretion after considering any tax, accounting and financial
consequences, may authorize any one or more of the following
additional methods of payment:
(a) Acceptance of the optionee's full
recourse promissory note for all or part of the Option price,
payable on such terms and bearing such interest rate as
determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no
additional interest would be imputed), which promissory note may
be either secured or unsecured in such manner as the Adminis
trator shall approve (including, without limitation, by a
security interest in the shares of the Company);
(b) Subject to the discretion of the
Administrator and the terms of the stock option agreement
granting the Option, delivery by the optionee of shares of Common
Stock already owned by the optionee for all or part of the Option
price, provided the fair market value (determined as set forth in
Section 6.1.10) of such shares of Common Stock is equal on the
date of exercise to the Option price, or such portion thereof as
the optionee is authorized to pay by delivery of such stock; and
(c) Subject to the discretion of the
Administrator, through the surrender of shares of Common Stock
then issuable upon exercise of the Option, provided the fair
market value (determined as set forth in Section 6.1.10) of such
shares of Common Stock is equal on the date of exercise to the
Option price, or such portion thereof as the optionee is
authorized to pay by surrender of such stock.
(d) By means of so-called cashless
exercises as permitted under applicable rules and regulations of
the Securities and Exchange Commission and the Federal Reserve
Board.
6.1.7 Termination of Employment. If for any reason
other than death or permanent and total disability, an optionee
ceases to be employed by the Company or any of its Affiliates
(such event being called a "Termination"), Options held at the
date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within three months of
the date of such Termination, or such other period of not less
than 30 days after the date of such Termination as is specified
in the Option Agreement or by amendment thereof (but in no event
after the Expiration Date); provided, however, that if such
exercise of the Option would result in liability for the optionee
under Section 16(b) of the Exchange Act, then such three-month
period automatically shall be extended until the tenth day
following the last date upon which optionee has any liability
under Section 16(b) (but in no event after the Expiration Date).
If an optionee dies or becomes permanently and totally disabled
(within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that
the Option remains exercisable after Termination, Options then
held (to the extent then exercisable) may be exercised, in whole
or in part, by the optionee, by the optionee's personal
representative or by the person to whom the Option is transferred
by devise or the laws of descent and distribution, at any time
within six months after the death or six months after the
permanent and total disability of the optionee or any longer
period specified in the Option Agreement or by amendment thereof
(but in no event after the Expiration Date). For purposes of
this Section 6.1.7, "employment" includes service as a director
or as a consultant. For purposes of this Section 6.1.7, an
optionee's employment shall not be deemed to terminate by reason
of sick leave, military leave or other leave of absence approved
by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either
contractually or by statute.
6.1.8 Withholding and Employment Taxes. At the time
of exercise of an Option and as a condition thereto, or at such
other time as the amount of such obligation becomes determinable
(the "Tax Date"), the optionee shall remit to the Company in cash
all applicable federal and state withholding and employment
taxes. Such obligation to remit may be satisfied, if authorized
by the Administrator in its sole discretion, after considering
any tax, accounting and financial consequences, by the optionee's
(i) delivery of a promissory note in the required amount on such
terms as the Administrator deems appropriate, (ii) tendering to
the Company previously owned shares of Stock or other securities
of the Company with a fair market value equal to the required
amount, or (iii) agreeing to have shares of Common Stock (with a
fair market value equal to the required amount) which are
acquired upon exercise of the Option withheld by the Company.
6.1.9 Other Provisions. Each Option granted under
this Plan may contain such other terms, provisions, and condi
tions not inconsistent with this Plan as may be determined by the
Administrator, and each ISO granted under this Plan shall include
such provisions and conditions as are necessary to qualify the
Option as an "incentive stock option" within the meaning of
Section 422 of the Code.
6.1.10 Determination of Value. For purposes of the
Plan, the fair market value of Common Stock or other securities
of the Company shall be determined as follows:
(a) If the stock of the Company is
regularly quoted by a recognized securities dealer, and selling
prices are reported, its fair market value shall be the closing
price of such stock on the date the value is to be determined,
but if selling prices are not reported, its fair market value
shall be the mean between the high bid and low asked prices for
such stock on the date the value is to be determined (or if there
are no quoted prices for the date of grant, then for the last
preceding business day on which there were quoted prices).
(b) In the absence of an established
market for the stock, the fair market value thereof shall be
determined in good faith by the Administrator, with reference to
the Company's net worth, prospective earning power, dividend-
paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's
industry, the Company's position in the industry, the Company's
management, and the values of stock of other corporations in the
same or a similar line of business.
6.1.11 Option Term. Subject to Section 6.3.4, no
Option shall be exercisable more than ten years after the date of
grant, or such lesser period of time as is set forth in the stock
option agreement relating to such Option (the end of the maximum
exercise period stated in the stock option agreement is referred
to in this Plan as the "Expiration Date").
6.2 Terms and Conditions to Which Only NQOs Are Subject.
The exercise price of Options granted under this Plan which are
designated as NQOs shall not less than 85% of the fair market
value (determined in accordance with Section 6.1.10) of the stock
subject to the Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs
shall be subject to the following terms and conditions:
6.3.1 Exercise Price. (a) Except as set forth in
Section 6.3.1(b), the exercise price of an ISO shall be deter
mined in accordance with the applicable provisions of the Code
and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.10) of the stock
covered by the Option at the time the Option is granted.
(b) The exercise price of an ISO granted
to any Ten Percent Shareholder shall in no event be less than
110% of the fair market value (determined in accordance with
Section 6.1.10) of the stock covered by the Option at the time
the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired
by exercise of an ISO granted pursuant to this Plan is disposed
of in a "disqualifying disposition" within the meaning of Section
422 of the Code (a disposition within two years from the date of
grant of the Option or within one year after the receipt of such
stock on exercise of the Option), the holder of the stock
immediately before the disposition shall promptly notify the
Company in writing of the date and terms of the disposition and
shall provide such other information regarding the Option as the
Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in antici
pation of employment as provided in Section 5(d), the Option
shall be deemed granted, without further approval, on the date
the grantee assumes the employment relationship forming the basis
for such grant, and, in addition, satisfies all requirements of
this Plan for Options granted on that date.
6.3.4 Term. Notwithstanding Section 6.1.11, no ISO
granted to any Ten Percent Shareholder shall be exercisable more
than five years after the date of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an
Option shall give written notice to the Company at its principal
executive office, to the attention of the officer of the Company
designated by the Administrator, accompanied by payment of the
exercise price and withholding taxes as provided in Sections
6.1.6 and 6.1.8. The date the Company receives written notice of
an exercise hereunder accompanied by payment of the exercise
price will be considered as the date such Option was exercised.
(b) Promptly after receipt of written
notice of exercise of an Option and the payments called for by
Section 7(a), the Company shall, without stock issue or transfer
taxes to the optionee or other person entitled to exercise the
Option, deliver to the optionee or such other person a
certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of the Option shall
not have any privileges as a shareholder with respect to any
shares of stock covered by the Option until the date of issuance
(as evidenced by the appropriate entry on the books of the
Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted hereunder shall
interfere with or limit in any way the right of the Company or of
any of its Affiliates to terminate any optionee's employment or
consulting at any time, nor confer upon any optionee any right to
continue in the employ of, or consult with, the Company or any of
its Affiliates.
9. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock 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 Act").
10. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating
any limitations on the power of the Company to adopt such other
incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options other than
under the Plan.
11. MARKET STANDOFF
Each optionee, if so requested by the Company or any
representative of the underwriters in connection with any
registration of the offering of any securities of the Company
under the Securities Act, shall not sell or otherwise transfer
any shares of Common Stock acquired upon exercise of Options
during the 1 year period following the effective date of a
registration statement of the Company filed under the Securities
Act; provided, however, that such restriction shall apply only to
registration statements of the Company to become effective under
the Securities Act after the date of adoption of this Plan which
includes securities to be sold on behalf of the Company to the
public in an underwritten public offering under the Securities
Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until
the end of such 1 year period.
12. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or
discontinue this Plan. Without the consent of an optionee, no
amendment, alteration, suspension or discontinuance may adversely
affect outstanding Options except to conform this Plan and ISOs
granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment,
alteration, suspension or discontinuance shall require
shareholder approval unless (a) shareholder approval is required
to preserve incentive stock option treatment for federal income
tax purposes or (b) the Board otherwise concludes that
shareholder approval is advisable.
13. EFFECTIVE DATE OF PLAN; TERMINATION
This Plan shall become effective upon adoption by the Board
provided, however, that no Option shall be exercisable unless and
until written consent of the shareholders of the Company, or
approval of shareholders of the Company voting at a validly
called shareholders' meeting, is obtained within twelve months
after adoption by the Board. If such shareholder approval is not
obtained within such time, Options granted hereunder shall
terminate and be of no force and effect from and after expiration
of such twelve-month period. Options may be granted and
exercised under this Plan only after there has been compliance
with all applicable federal and state securities laws. This Plan
(but not Options previously granted under this Plan) shall
terminate within ten years from the date of its adoption by the
Board.
14. DELIVERY OF FINANCIAL STATEMENTS
To the extent required by applicable laws, rules and
regulations, the Company shall deliver to each optionee financial
statements of the Company at least annually while such optionee
holds an outstanding Option.
