This Proxy Statement was inadvertently not filed with the SEC at the time it was
delivered to the shareholders of Cimetrix Incorporated on April 20, 1998,
consequently this filing is being made to bring the Company's file with the SEC
current.
CIMETRIX INCORPORATED
April 20, 1998
Dear Shareholder:
On behalf of the Board of Directors and management, I cordially invite
you to attend the Annual Meeting of the Shareholders of Cimetrix Incorporated,
which will be held on Saturday, May 16, 1998, at 9:00 a.m. in the Marriott
Hotel, 75 South West Temple, Salt Lake City, Utah.
At the meeting, in addition to electing five directors, your Board is
asking shareholders to approve the 1998 Stock Option Plan. These proposals are
fully set forth in the accompanying proxy statement which you are urged to read
thoroughly. I will also report on the progress of the Company and answer
shareholder questions.
It is important that your shares are represented and voted at the
meeting whether or not you plan to attend. Accordingly, you are requested to
sign, date and mail the enclosed proxy in the envelope provided at your earliest
convenience.
Thank you for your cooperation.
Very truly yours,
/s/ Paul A. Bilzerian
---------------------
Paul A. Bilzerian
President
<PAGE>
CIMETRIX INCORPORATED
6979 South High Tech Drive
Salt Lake City, Utah 84047-3757
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Meeting Date: May 16, 1998
TO OUR SHAREHOLDERS:
The Annual Meeting of the Shareholders of Cimetrix Incorporated, a
Nevada corporation (the "Company"), will be held on May 16, 1998, commencing at
9:00 a.m., in the Marriott Hotel, 75 South West Temple, Salt Lake City, Utah, to
consider and vote on the following matters described in this notice and the
accompanying Proxy Statement:
1. To elect five directors to the Company's Board of Directors to serve
for one-year terms.
2. To approve the Cimetrix Incorporated 1998 Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 20,
1998 as the record date for determination of shareholders entitled to vote at
the Annual Meeting or any adjournments thereof, and only record holders of
Common Stock at the close of business on that day will be entitled to vote.
TO ASSURE REPRESENTATION AT THE ANNUAL MEETING, SHAREHOLDERS ARE URGED
TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING
THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE PREVIOUSLY RETURNED A
PROXY. A PROXY MAY BE REVOKED BY WRITTEN REVOCATION DELIVERED TO THE COMPANY AT
ANY TIME PRIOR TO THE ANNUAL MEETING.
By Order of the Board of Directors,
/s/ Riley G. Astill
-------------------
Riley G. Astill
Vice President of Finance and Secretary
April 20, 1998
Salt Lake City, Utah
<PAGE>
CIMETRIX INCORPORATED
6979 South High Tech Drive
Salt Lake City, Utah 84047-3757
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Meeting Date: May 16, 1998
This Proxy Statement is being sent on or about April 20, 1998 in
connection with the solicitation of proxies by the Board of Directors of
Cimetrix Incorporated, a Nevada corporation (the "Company" or "Cimetrix"). The
proxies are for use at the 1998 Annual Meeting of the Shareholders of the
Company, which will be held on May 16, 1998, commencing at 9:00 a.m., in the
Marriott Hotel, 75 South West Temple, Salt Lake City, Utah, and at any meetings
held upon adjournment thereof (the "Annual Meeting"). The record date for the
Annual Meeting is the close of business on April 20, 1998 (the "Record Date").
Only holders of record of the Company's Common Stock on the Record Date are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting.
A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please date, sign and return the enclosed proxy card as
promptly as possible, in the postage-prepaid envelope provided, to ensure that
your shares will be voted at the Annual Meeting. Any shareholder who returns a
proxy has the power to revoke it at any time prior to its effective use by
filing with the Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Unless contrary instructions are given, any such proxy, if not
revoked, will be voted at the Annual Meeting for the five nominees for election
as directors as set forth in this Proxy Statement; for the proposal to adopt the
Cimetrix Incorporated 1998 Stock Option Plan; and as recommended by the Board of
Directors, in its discretion, with regard to all other matters which may
properly come before the Annual Meeting. The Company does not currently know of
any such other matters.
At the Record Date, there were 24,143,928 Shares of the Company's
Common Stock issued and outstanding. The presence, either in person or by proxy,
of persons entitled to vote a majority of the Company's outstanding Common Stock
is necessary to constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining a quorum, but are not considered as having voted for purposes of
determining the outcome of a vote. No other voting securities of the Company
were outstanding at the Record Date.
Holders of the Common Stock have one vote for each share on any matter
that may be presented for consideration and action by the shareholders at the
Annual Meeting. In order for action to be taken on any matter, it must receive a
majority of the votes present and voting in person or by proxy except the
election of directors. Directors may be elected by a plurality vote. The five
nominees for director receiving the highest number of votes at the Annual
Meeting will be elected. Unless instructed otherwise, the shares represented by
proxies to management will be voted for the named nominees.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company may
request banks and brokers to solicit their customers who beneficially own Common
Stock listed of record in names of nominees, and will reimburse such banks and
brokers for their reasonable out-of-pocket expenses for such solicitations. The
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by officers, directors and regular employees of the
Company, but no additional compensation will be paid to such individuals.
-1-
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has determined that the five directors named
below will be nominated for election as directors at the Annual Meeting. Each
nominee has consented to being named in the Proxy Statement as a nominee for
election as director and has agreed to serve as director if elected.
The Board of Directors have advised the Company that it intends at the
Annual Meeting to vote the shares covered by the proxies for the election of the
nominees named below. If any one or more of such nominees should for any reason
become unavailable for election, the Board of Directors may vote for the
election of such substitute nominees as the Board of Directors may propose. The
accompanying form of proxy contains a discretionary grant of authority with
respect to this matter.
The nominees for election as directors at the Annual Meeting are set
forth below.
Positions with Director
Name the Company Since
Paul A. Bilzerian President, Chief Executive February 9, 1996
Officer and Director
Lowell Anderson Director January 23, 1998
Dr. Ron Lumia Director January 1, 1996
Randall Mackey Director January 23, 1998
Bill Van Drunen
Biographical Information
There is no family relationship among the current directors and
executive officers. The following sets forth brief biographical information for
each director and prospective director of Cimetrix.
Paul A. Bilzerian, age 47, President, Chief Executive Officer and director, has
been involved in Cimetrix in various capacities since 1994. Mr. Bilzerian has
been the President of Bicoastal Holding Company, a private investment company,
since 1993. During the period 1988 to 1989, he was the Chairman and Chief
Executive Officer of the Singer Company. Mr. Bilzerian has been involved in more
than $10 billion dollars of corporate transactions and financing. He has a B.S.
Degree in Political Science from Stanford University and a Masters in Business
Administration from Harvard University.
Dr. Lowell K. Anderson, age 55, has been a director of Cimetrix since
January 23, 1998. Dr. Anderson has practiced Oral and Maxillofacial Surgery from
1975 to the present. From 1973 to 1975, Dr. Anderson served as a Major in the
United States Air Force. From 1970 to 1973, Dr. Anderson did his residency at
Mayo Clinic and Mayo Graduate School of Medicine. Dr. Anderson graduated from
the University of Louisville Dental School with honors in 1966. Dr. Anderson is
currently a member of the Brigham Young University Alumni Board. Dr. Anderson
also served as President of the Western Society of Oral and Maxillofacial
Surgeons, representing over 600 surgeons.
-2-
<PAGE>
Dr. Ron Lumia, age 47, has been a director of Cimetrix since January 1996.
He has been a Professor in the Mechanical Engineering Department of the
University of New Mexico since October, 1994. From 1986 through September, 1994,
Dr. Lumia served as Group Leader at the National Institute of Standards and
Technology (NIST), performing research in the areas of advanced automation,
robotics, machine vision, and systems integration. Previously, he taught at
ESIEE (Paris, France), Virginia Tech, and the National University of Singapore,
where he consulted for a variety of companies. Dr. Lumia received a B.S. from
Cornell University and a M.S. and Ph.D. from the University of Virginia, all in
electrical engineering. He is the author of over 100 technical papers.
Randall A. Mackey, age 52, has been a director of Cimetrix since January 23,
1998. Mr. Mackey has been a shareholder of the Salt Lake City law firm of
Mackey, Price & Williams and its predecessor firms. From 1979 to 1989, he
practiced law with the Salt Lake City law firm of Fabian & Clendenin, where he
was a shareholder and director of the firm from 1982 to 1989. From 1977 to 1979
Mr. Mackey was associated with the Washington, D.C. law firm of Hogan & Hartson.
Mr. Mackey received a Bachelor of Science degree in Economics from the
University of Utah in 1968, a Master in Business Administration degree from
Harvard University in 1970, a Juris Doctor degree from Columbia University in
1975 and a Bachelor of Civil law degree from Oxford University in 1977. Mr.
Mackey has served as Secretary and a director since November 1995 of Paradigm
Medical Industries, Inc., which develops, manufactures and sells ophthalmic
surgical systems.
John W. Van Drunen, age 43, is a Vice President at First Security Bank. Mr.
Van Drunen has been with First Security Bank since 1993. Prior to this he was
with Bank America in various assignments from 1988 to 1993. He has a B.S. degree
in Business Management from Colorado State University.
Board Meetings and Committees
The Company's Board of Directors met twelve times during 1997. Each of
the Company's directors attended at least 75% of the meetings of the Board of
Directors. The Company's Board of Directors serves in its entirety as the
Nominating, Compensation and Audit Committees. All issues normally addressed by
these committees are addressed by the full Board of Directors during their
meetings.
All directors of the Company hold office until the next annual meeting
of shareholders and until their successors have been elected and qualified.
EXECUTIVE OFFICERS
The following table sets forth certain biographical information with
respect to the executive officers of the Company (biographical information for
Mr. Bilzerian is set forth above):
Name Age Title
Paul A. Bilzerian 47 President and Chief Executive Officer
David P. Faulkner 43 Executive Vice President of Marketing
Robert Reback 38 Executive Vice President of Sales
Bradley A. Palser 41 Executive Vice President of Engineering
Riley G. Astill 37 Vice President of Finance, Chief Financial Officer
-3-
<PAGE>
David P. Faulkner, Executive Vice President of Marketing, joined the
Company in August 1996. Mr. Faulkner was previously employed as the Manager of
PLC Marketing, Manager of Automotive Operations and District Sales Manager for
GE Fanuc Automation, a global supplier of factory automation computer equipment
specializing in programmable logic controllers, factory software and computer
numerical controls from 1986-1996. Mr. Faulkner has a B.S. Degree in Electrical
Engineering and a Masters Degree in Business Administration from Rensselaer
Polytechnic Institute.
Robert H. Reback, Executive Vice President of Sales, joined Cimetrix as
Vice President of Sales in January 1996 and was promoted to Executive Vice
President of Sales and Marketing in January, 1997. Mr. Reback was the District
Manager of Fanuc Robotics' West Coast business unit from 1994-1995. From
1985-1993 he was Director of Sales/Account Executives for Thesis, Inc., a
privately-owned supplier of factory automation software and was previously a
Senior Automation Engineer for Texas Instruments. Mr. Reback has a B.S. Degree
in Mechanical Engineering and a M.S. Degree in Industrial Engineering from
Purdue University.
Bradley A. Palser, Executive Vice President of Software Engineering, joined
the Company in November 1997. Mr. Palser was previously employed as the Director
of Engineering and General Manager of several Software Engineering facilities
for Unisys Corporation from 1983-1997. Prior to that, Westinghouse Electric
employed Mr. Palser as a principal software engineer automating power plants and
steel mills. Mr. Palser has a B.S. Degree in Mathematics from Carnegie Mellon
University.
Riley G. Astill, Vice President of Finance, Chief Financial Officer,
originally joined Cimetrix as Controller, in July, 1994. He remained Controller
until October, 1996, when he left the Company prior to its moving to Tampa. Mr.
Astill rejoined Cimetrix as Vice President of Finance in December, 1997. Mr.
Astill was Controller of a privately held Salt Lake City publisher from
1991-1994. From 1990-1991, he was a Senior Accountant for Oryx Energy Company.
From 1988-1990 he was an Accountant for Ernst & Young in Dallas. He has a B.S.
Degree in Accounting from the University of Utah and a Masters Degree in
Accounting from Utah State University.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Director Compensation
Directors of the Company receive no cash compensation, but are
reimbursed for expenses. Each director (but not including directors who are
officers or employees) is granted stock options to purchase 24,000 shares of
common stock at an exercise price per share in excess of the market price at the
time of grant, 2,000 of which vest upon the attendance at each monthly meeting
of the Board. Vested options become exercisable six months after vesting. On May
31, 1997, the date of the 1997 Annual Shareholders Meeting, Dr. Ron Lumia and
Douglas Davidson received options to purchase 24,000 shares of common stock at
an exercise price of $6.00 per share. Randall Mackey and Lowell Anderson became
directors on January 23, 1998 and were granted stock options to purchase 8,000
shares of common stock at an exercise price of $2.50.
-4-
<PAGE>
Executive Officer Compensation
The following table discloses compensation, for the three fiscal years
ended December 31, 1997, paid by the Company to the named executive officers
whose annual salary equals or exceeds $100,000 (collectively the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------Long-Term Compensation---------------------
---------Annual Compensation-------- --------Awards----------- ------------Payout------------
Restricted Securities Long-term
Stock Underlying Incentive All Other
Name and Principal Position Year Salary($) Bonus Other Awards($) Options Payout($) Compensation
--------------------------- ---- --------- ----- ----- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul A. Bilzerian, President 1997 90,000(1) 0 0 0 0 0 0
and Chief Executive Officer 1996 50,000(1) 0 0 0 0 0 0
1995 36,000(1) 0 0 0 0 0 0
Robert H. Reback, Executive 1997 121,769 0 0 0 0 0 0
Vice President of Sales 1996 115,000 15,000 0 0 120,000 0 0
1995 0 0 0 0 0 0 0
Bradley A. Palser, Executive 1997 12,691 0 0 0 20,000 0 0
Vice President of Engineering 1996 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0
David P. Faulkner, Executive 1997 101,475 0 20,000 0 0 0 0
Vice President Marketing 1996 35,483 0 0 0 150,000 0 0
1995 0 0 0 0 0 0 0
</TABLE>
(1) These amounts were paid or are owed to Bicoastal Holding Company for Mr.
Bilzerian's services. (See "Certain Relationships and Transactions.")
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant
of stock options to the person named in the Summary Compensation Table during
the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
--------------------Individual Grants------------------- Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options Employees in Price Per Expiration Option Term ($) (1)
Name Granted (#) Fiscal Year Share ($) Date 5% 10%
---- ---------- ----------- --------- ---- -- --
<S> <C> <C> <C> <C> <C> <C>
Paul A. Bilzerian 0 n/a n/a n/a n/a n/a
Robert H. Reback 0 0 n/a n/a n/a n/a
Bradley A. Palser 20,000 100 4.00 11/5/02 102,000 128,800
David P. Faulkner 0 0 n/a n/a n/a n/a
------------
</TABLE>
(1) Potential realizable value is based on the assumption that the common stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the 5 year option term,
using the exercise price of each option as the beginning value. The real
value of the options depends on the actual appreciation of the value of the
Company's common stock. These numbers do not reflect the Company's
estimates of future stock price growth and no assurance exists that the
price of the Company's common stock will appreciate at the rates assumed in
the table.
-5-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at In-the-Money Options at
On Exercise Value Fiscal Year-End(#) Fiscal Year-End ($)
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Bilzerian 3,600,000(1) 18,737,500 0 0 0 0
Robert H. Reback 0 0 60,000 60,000 0 0
David P. Faulkner 0 0 50,000 100,000 0 0
Bradley A. Palser 0 0 0 20,000 0 0
</TABLE>
(1) Excludes 2.4 million shares of Cimetrix common stock held by the Paul A.
Bilzerian and Terri L. Steffen 1994 Irrevocable Trust for the Benefit of
Adam J. Bilzerian and Dan B. Bilzerian. Paul A. Bilzerian and Terri L.
Steffen disclaim any beneficial ownership of these shares. The Trust is
irrevocable and has independent trustees responsible for the affairs of the
Trust.
REPORT ON EXECUTIVE OFFICER COMPENSATION
The Board of Directors reviewed and approved the compensation and fringe
benefits for the Company's officers, consisting of approximately nine persons.
The Board evaluates the performance of all officers, including the President and
Chief Executive Officer, and administers the Company's compensation program for
officers.
Compensation Philosophy
The Company's compensation philosophy for officers conforms to its
compensation philosophy for all employees generally. The Company's compensation
is designed to:
o Provide compensation comparable to that offered by companies with
similar business, allowing the Company to successfully attract and
retain the employees necessary to its long-term success.
o Provide compensation that rewards individual achievement and
differentiates among employees based upon individual performance.
o Provide incentive compensation that varies according to both the
Company's success in achieving its performance goals and the
employee's contribution to that success; and
o Provide an appropriate linkage between employee compensation and
the creation of shareholder value through awards that are tied to
the Company's financial performance and by facilitating employee
stock ownership.
In furtherance of these goals, the Company's officers' compensation comprises
salary, annual cash bonuses, long-term incentive compensation in the form of
stock options and various fringe benefits, including medical benefits and a
401(k) savings plan.
-6-
<PAGE>
Salaries
The Board of Directors reviewed the salaries of all the officers of the
Company for fiscal year 1997. The Board of Directors made salary decisions
concerning the officers based upon a variety of considerations in conformance
with the compensation philosophy stated above. First, salaries were
competitively set relative to both other companies in the software industry and
other comparable companies. Second, the Board of Directors considered each
officer's level of responsibility and individual performance, including an
assessment of the person's overall value to the Company. Third, internal equity
among employees was factored into the decision. Finally, the Board of Directors
considered the Company's financial performance and its ability to absorb any
increases in salaries.
Bonuses
Each officer is eligible to receive an annual cash bonus that is
generally paid pursuant to an incentive compensation formula established at the
beginning of a year in connection with the preparation of the Company's
operating budget for the year. In formulating decisions with respect to cash
bonus awards, the Board of Directors evaluates each officer's role and
responsibility in the Company and other factors that the Board deems relevant to
motivate each officer to achieve strategic performance goals.
Stock Options
The Company has a stock option plan that is designed to align the
interests of the shareholders and the Company's officers in the enhancement of
shareholder value. Stock options are granted under the plan by an administrative
committee comprising disinterested members of the Board of Directors. In
general, stock options are granted at an exercise price not lower than the fair
market value of the Company's Common Stock on the date of grant. In formulating
its recommendations to the administrative committee for the stock option plan,
the Board of Directors evaluates the Company's overall financial performance for
the year, the desirability of long-term service from an officer and the number
of stock options held by other officers in the Company who have the same, more
or less responsibility. To encourage long-term performance, the stock options
granted in fiscal year 1997 vest ratably over a two-year period and expire up to
five years after the date of grant.
Chief Executive Officer Compensation
The total compensation of the President and Chief Executive Officer for
fiscal year 1997 was based on a contract between the Company and Bicoastal
Holding Company, which was approved by the shareholders on May 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 8, 1995, the Company renegotiated its contract with Bicoastal
Holding Company, an affiliate of Paul A. Bilzerian, the President, Chief
Executive Officer and a director of the Company, in order to retain Mr.
Bilzerian's services. Under the terms of the contract, Bicoastal Holding Company
was paid $4,167 per month until March 31, 1997. In addition, Mr. Bilzerian had
rent-free use of the Company's residence in Provo, Utah from August, 1995 until
June, 1996.
On April 15, 1997, the Company entered into another agreement with
Bicoastal Holding Company providing for the continued services of Paul A.
Bilzerian and his wife, Terri L. Steffen. The agreement provides that the
Company is to pay Bicoastal Holding Company for their services at the rate
-7-
<PAGE>
of $10,000 per month for Mr. Bilzerian's services and $4,000 per month for Ms.
Steffen's services until March 21, 1999. The Company has the right to terminate
the employment arrangement at the end of any month.
On January 23, 1998, the Board of Directors approved the lease of a
home in Sandy, Utah for $2,700 per month for the purpose of inducing Mr.
Bilzerian to temporarily relocate his family to Utah for a significant portion
of the year. The term of the lease is from January 10, 1998 through December 31,
1998, with two six-month renewal options. The Company also agreed to pay all of
Mr. Bilzerian's living expenses related to the temporary relocation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and greater than 10% shareholders to
file reports of ownership (on Form 3) and periodic changes in ownership (on
Forms 4 and 5) of Company securities with the Securities and Exchange
Commission. For the fiscal year 1997, the Company's officers and directors,
through an oversight, filed late Form 3 reports. The Company believes that its
officers and directors are otherwise current in their 16(a) reporting
requirements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Company's common stock (exclusive of options or warrants), as
of April 20, 1998, for (i) each executive officer of the Company; (ii) each
director of the Company; and (iii) each beneficial owner of more than 5% of the
Company's common stock; and (iv) all executive officers and directors as a
group:
Name of Person of Group Number of Shares Percent of
Ownership
----------------------- ---------------- ----------
Paul Bilzerian 3,000,000(1) 12.4%
16229 Villarreal De Avila
Tampa, Florida 33613
Bilzerian Irrevocable Trust 2,400,000(2) 9.9%
400 North Tampa Street
Tampa, Florida 33602
Lincoln and Linda Dastrup 1,925,950 8.0%
871 Osmond Lane
Provo, Utah 84604
Douglas A. Davidson 55,000 0.2%
4506 Silver Wing Ct.
Castle Rock, CO 80104
Dr. Lowell K. Anderson 49,450 0.2%
2842 North Foothill Drive
Provo, UT 84604
-8-
<PAGE>
Dr. Ron Lumia 1,500 *
443 Live Oak Loop NE
Albuquerque, NM 87122
Robert H. Reback 1,000 *
600 Daybreaker Drive
Park City, UT 84098
Randall A. Mackey - *
1474 Harvard Ave
Salt Lake City, UT 84105
Bradley A. Palser - *
1416 West 690 South
Orem, UT 84058
David P. Faulkner - *
8803 South Willow Green Drive
Sandy, UT 84093
Officers and Directors (8 persons) 3,106,950 12.9%
---------------------------------
* Less than 1%.
(1) Overseas Holdings Limited Partnership, a Nevada limited partnership (whose
general partner is Bicoastal Holding Company, a Cayman Islands corporation, and
whose limited partner is the Paul A. Bilzerian and Terri L. Steffen 1995
Revocable Family Trust), owns 3,000,000 shares of Cimetrix common stock. The
Paul A. Bilzerian and Terri L. Steffen 1995 Revocable Family Trust is the
beneficial owner of all the stock of Bicoastal Holding Company. Terri L. Steffen
is the wife of Paul A. Bilzerian and is a beneficiary of the Paul A. Bilzerian
and Terri L. Steffen 1995 Revocable Family Trust and, therefore, is also deemed
to be the beneficial owner of 3,000,000 shares of Cimetrix common stock. The
number of shares indicated for Mr. Bilzerian excludes proxies to vote 1,978,012
shares held by W. Keith Seolas and family members pursuant to an agreement
between the Seolas family and Mr. Bilzerian executed on March 22, 1994 and
amended on August 9, 1995. Mr. Bilzerian holds the irrevocable proxies to vote
these shares for directors and on most ordinary matters presented to
shareholders, but not extraordinary matters, such as mergers, sales, or
dissolution. Mr. Bilzerian's proxies expire on December 31, 1998. Ownership of
the shares held by W. Keith Seolas and his family members are in dispute with
the Company. The number of shares indicated for Mr. Bilzerian also excludes
shares held by the Paul A. Bilzerian and Terri L. Steffen 1994 Irrevocable Trust
(see footnote 2 below).
(2) The Paul A. Bilzerian and Terri L. Steffen 1994 Irrevocable Trust for the
Benefit of Adam J. Bilzerian and Dan B. Bilzerian owns 2.4 million shares of
Cimetrix common stock. Adam J. Bilzerian and Dan B. Bilzerian are the sons of
Paul A. Bilzerian and Terri L. Steffen. Paul A. Bilzerian and Terri L. Steffen
disclaim any beneficial ownership of this stock. The Trust is irrevocable and
has independent trustees responsible for the affairs of the Trust.
-9-
<PAGE>
PROPOSAL NO. 2
TO APPROVE THE CIMETRIX 1998 STOCK OPTION PLAN
On January 23, 1998, the Board of Directors approved the Company's 1998
Stock Option Plan (the "98 Plan") which became effective January 1, 1998,
subject to shareholder approval. The 98 Plan provides for the grant to
directors, officers, and employees of the Company of options to acquire up to
2,000,000 shares of the Company's common stock. The 98 Plan is an incentive
stock option plan within the meaning of section 422 of the Internal Revenue Code
and is intended to replace the Company's 1994 Stock Option Plan. In order to
participate in the 98 Plan, an employee must return all of the options that he
or she received under the 1994 Stock Option Plan. At the Annual Meeting of
Shareholders, the shareholders are being asked to consider and approve the
adoption of the 98 Plan. The essential features of the 98 Plan are summarized
below. A copy of the 98 Plan is attached hereto as Exhibit 1.
Purpose
The purpose of the 98 Plan is to promote the interests of the Company
and its shareholders by enabling the Company to attract and retain, on a
long-term basis, directors, key executives and employees by providing them with
significant proprietary incentives based on the Company's long-term success. The
Company's 1994 Stock Option Plan authorized up to 2,500,000 options to be
issued, all of which expire by December 31, 1999. In addition, the Company has
issued warrants to purchase 450,000 shares to its former advisory panel members,
warrants to purchase 330,000 shares to David L. Redmond, its former Chief
Financial Officer, and warrants to purchase 829,000 shares to purchasers of the
Company's Senior Notes. Over the period from January 1, 1998 to December 31,
1999, the Company expects to reduce the total amount of options and warrants
authorized and outstanding by approximately 1,300,000. In January, 1998, Mr.
Redmond returned all of his 330,000 warrants to the Company. In addition, the
Company does not intend to grant 450,000 of the 2,000,000 options authorized
under the 98 Plan unless the 450,000 warrants granted to the former advisory
panel members expire without being exercised on September 30, 1999.
Eligibility
The 98 Plan provides that options may be granted to any employee of the
Company. The committee selects the participants and determines the number of
shares to be subject to each option. In making such determinations, the
participant's duties and responsibilities, present and potential contributions
to the Company's success, and other relevant factors are considered.
Option Terms
The terms of options granted are determined by the committee. Each
option is evidenced by a stock option agreement between the Company and the
participant. Each option is also subject to the following terms and conditions:
(a) Vesting Schedule. 25% of the option vests one year after the grant
date, and the remainder vests over the following three years, subject
to the acceleration upon certain changes in control of the Company.
The committee can alter this vesting schedule in a particular option
agreement. An option is exercised by giving written notice to the
Company, specifying the number of shares to be purchased and tendering
to the Company the full purchase price plus any tax withholding
liability the Company may incur upon exercise. The exercise price will
be payable in cash or such other form of consideration as the
committee approves.
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(b) Exercise Price. The exercise price of options granted under
the 98 Plan is determined by the committee and must be not
less than 100% of the closing trade price of the Company's
stock on the date the option is granted. Exercise prices are
normally higher than the market price of the Company's stock
at the grant date. The Company's stock price was $1.8125 on
March 31, 1998. The Company has no present intention of
granting options below $2.50.
(c) Termination of Employment. If an optionee's employment
relationship with the Company is terminated for reasons other
than death or disability, options held by such person cease to
be exercisable ninety days after the employee ceases to be an
employee of the Company.
(d) Termination of Options. Unless otherwise provided in the
option agreement, all options granted will expire five years
after their grant dates.
(e) Nontransferability of Options. Except in the event of death,
an option is not transferable by an optionee. It is
exercisable only by the optionee during the optionee's
lifetime, and only by his heirs or executors following his
death.
Changes in Control
If the Company sells all or substantially all its assets or is acquired
in a merger, tender offer transaction, or another type of reorganization, the
options will fully vest and become exercisable immediately prior to such
transaction.
The Board of Directors has adopted the Company's 1998 Stock Option Plan
and recommends a vote FOR approval of the 1998 Plan.
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PERFORMANCE GRAPH
The following graph shows a comparison of the three year cumulative
total return for the Company's Common Stock, the Nasdaq Stock Market (U.S.)
Index, and the Nasdaq Computer and Data Processing Stocks Index, assuming an
investment of $100 on December 1, 1994. The cumulative return of the Company was
computed by dividing the difference between the price of the Company's Common
Stock at the end and the beginning of the measurement period (December 1, 1994
to December 31, 1997) by the price of the Company's Common Stock at the
beginning of the measurement period.
[GRAPHIC OMITTED]
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ANNUAL REPORT
A copy of the Company's Annual Report, including financial statements
for the years ended December 31, 1997, 1996 and 1995, is being mailed with this
Proxy Statement to shareholders of record on the Record Date.
INDEPENDENT AUDITORS
Tanner & Company served as the Company's independent auditors for 1997.
One or more representatives of Tanner & Company are expected to be present at
the Annual Meeting and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholders who wish to include proposals for action at the Company's
1999 Annual Meeting of Shareholders in next year's proxy statement must, in
addition to other applicable requirements, cause their proposals to be received
in writing by the Company at its address set forth on the first page of this
Proxy Statement no later than January 1, 1999. Such proposals should be
addressed to the Company's Secretary and may be included in next year's proxy
statement if they comply with certain rules and regulations promulgated by the
Securities and Exchange Commission.
OTHER MATTERS
Management knows of no matters other than those listed in the attached
Notice of the Annual Meeting which are likely to be brought before the Annual
Meeting. However, if any other matters should properly come before the Annual
Meeting or any adjournment thereof, the persons named in the enclosed proxy will
vote all proxies given to them in accordance with their best judgment of such
matters.
By Order of the Board of Directors,
/s/ Riley G. Astill
---------------
Riley G. Astill
Vice President of Finance and Secretary
Salt Lake City, Utah
April 20, 1998
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EXHIBIT 1
CIMETRIX INCORPORATED
1998 INCENTIVE STOCK OPTION PLAN
(Corrected Version)
Cimetrix Incorporated establishes the following 1998 Incentive Stock
Option Plan for the exclusive benefit of its eligible employees:
ARTICLE I
PURPOSE AND INTERPRETATION
1.1 Purpose. The purpose of this Plan is to further the interests of
the Company and its shareholders by providing incentives in the form of Stock
Options to key employees who contribute materially to the success and
profitability of the Company. The Plan will enable the Company to attract and
retain key employees, to reward outstanding individual contributions, and to
give selected key employees an interest in the Company parallel to that of its
shareholders, thus enhancing their proprietary interest in the Company's
continued success and progress.
1.2 Definitions. As used in this Plan, the following capitalized terms
have the respective definitions attributed to them:
"Administrative Committee" means the Board of Directors or any
Board Committee to whom the Board of Directors has delegated the
administration of this Plan pursuant to section 2.1.
"Affiliate" means a Subsidiary, a parent corporation of the
Company, or a corporation of which 50% or more of the total combined
voting power of all classes of its stock is owned directly or
indirectly by a parent corporation of the Company.
"Board Committee" means any committee of Company directors
appointed by the Board of Directors pursuant to section 2.1 to
administer this Plan.
"Board of Directors"means the Board of Directors of the Company.
"Change in Control" means any of the following: (a) the
shareholders of the Company approve a plan of dissolution or complete
liquidation of the Company (unless the transaction is subsequently
abandoned or otherwise fails to occur); (b) the shareholders of the
Company approve a sale, lease, exchange, or other transfer to any
person other than the Company, a Subsidiary, or an affiliate of Paul A.
Bilzerian (in a single transaction or related series of transactions)
of all or substantially all of consolidated assets of the Company and
its Subsidiaries, excluding the creation (but not the foreclosure) of a
lien, mortgage, or security interest (unless the transaction is
subsequently abandoned or otherwise fails to occur); or (c) the
shareholders of the Company approve a merger, consolidation,
reorganization, tender offer, exchange offer, or share exchange in
which more than 50% of the outstanding Shares are or will be exchanged
for, or converted into, cash or securities of another corporation other
than a Subsidiary or an affiliate of Paul A. Bilzerian, unless the
transaction is subsequently abandoned or otherwise fails to occur, and
unless immediately after the transaction the former shareholders of the
Company beneficially own more than 50% of the combined voting power of
all the outstanding securities of a publicly traded corporation that
directly or indirectly through one or more subsidiaries beneficially
owns all or substantially all the consolidated assets of the Company
and its subsidiaries or more than 50% of the combined voting power of
all the outstanding securities of the Company that are entitled to vote
generally in the election of its directors.
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"Company" means Cimetrix Incorporated, a Nevada corporation
and the sponsor of this Plan.
"Date of Grant" means, with respect to any particular Stock
Option, the date when the Board of Directors or the Administrative
Committee authorizes the grant of the Stock Option to the Participant.
"Employee" means a person who is employed by the Company or
any Subsidiary on a full-time, salaried basis for at least 40 hours
each week, and, in addition, any officer or director of the Company.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, and includes all rules and regulations of the
United States Securities and Exchange Commission promulgated under that
act.
"Internal Revenue Code" means the United States Internal
Revenue Code of 1986, as amended from time to time, or any United
States income tax law subsequently enacted in substitution for that
code.
"Market Value" means, as of any particular determination date,
the fair market value of a Share determined as follows: (a) if the
Shares are not traded in the Nasdaq Stock Market or on a United States
national securities exchange, the mean arithmetic average (rounded to
the nearest whole cent) of the daily high bid and low asked quotations
per Share in the over-the-counter market for the three trading days
immediately preceding the determination date, as reported on the OTC
Bulletin Board or in the pink sheets published by the National
Quotations Bureau, Incorporated, or (b) if the Shares are traded in the
Nasdaq Stock Market, the mean arithmetic average (rounded to the
nearest whole cent) of the high bid and low asked prices per Share
quoted in the National Association of Securities Dealers Automated
Quotation System for the last trading day before the determination
date, as reported in The Wall Street Journal or another source that the
Administrative Committee considers reliable, or (c) if the Shares are
traded on a United States national securities exchange, the closing
sales price reported on the exchange for the last trading day before
the determination date, as reported in The Wall Street Journal or
another source that the Administrative Committee considers reliable.
"Option Agreement" means the agreement between the Company and
a Participant that sets forth the terms, conditions, limitations, and
restrictions applicable to the Participant's Stock Option.
"Option Year" means, with respect to a Stock Option granted
under this Plan, a period of 12 consecutive months beginning on its
Date of Grant or an anniversary of its Date of Grant.
"Participant" means an Employee who is selected by the
Administrative Committee to receive a Stock Option pursuant to this
Plan, in the person's capacity as a participant under the Plan.
"Plan" means this 1998 Incentive Stock Option Plan of Cimetrix
Incorporated, as originally adopted and as subsequently amended,
modified, or supplemented in accordance with its terms.
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"Proprietary Property" means all ideas, plans, methods,
discoveries, inventions, developments, improvements, trade secrets,
intellectual property, and other proprietary data, knowledge, and
information that a Participant solely or jointly knows, creates,
conceives, develops, or reduces to practice while employed by the
Company or any Subsidiary and that directly or indirectly benefits,
relates to, or is connected in any way with, the Participant's
employment with the Company or a Subsidiary, or any process, product,
formula, business, facility, research, equipment, machinery, technique,
experiment, computer program, software, source code, or user interface
screen or other development of the Company or any Subsidiary.
"Securities Act" means the United States Securities Act of
1933, as amended, and includes all rules and regulations of the United
States Securities and Exchange Commission promulgated under that Act.
"Shares" means shares of the Company's common stock, $.0001
par value per share, or any securities issued in exchange or
substitution for those shares pursuant to a transaction described in
section 5.1.
"Stock Option" means an option to purchase Shares from the
Company that is granted to a Participant pursuant to this Plan and is
intended to qualify as an incentive stock option, as defined in section
422 of the Internal Revenue Code, as in effect on the Date of Grant of
the option.
"Subsidiary" means a corporation of which 50% or more of the
total combined voting power of all classes of its stock is owned
directly or indirectly by the Company and includes any corporation that
qualifies as a Subsidiary corporation as defined in section 424(f) of
the Internal Revenue Code.
1.3 Other Recurring Words. As used in this Plan, (a) the word "or" is
not exclusive, (b) the words "consent" and "approval" are synonymous, (c) the
word "including" is always without limitation, (d) words in the singular number
include words in the plural number and vice versa, and (e) the following
uncapitalized words and terms have the respective meanings ascribed to them:
"affiliate" has the meaning attributed to it in Rule 12b-2
under the Exchange Act.
"beneficial owner" has the meaning attributed to it under Rule
13d-3 under the Exchange Act, and the terms "beneficially owned" and
"beneficial ownership" have the same meaning as "beneficial owner".
"business day" has the meaning attributed to it in Rule 14d-1
(c)(6) under the Exchange Act.
"disability" means a total and permanent disability as defined
in section 22(e)(3) of the Internal Revenue Code.
"group" has the meaning attributed to that term in Rule
13d-5(b)(1) under the Exchange Act and includes two or more persons who
agree to act in concert for the purpose of voting, acquiring, or
holding any securities of the Company or any Subsidiary.
"parent corporation" has the meaning attributed to that term
in section 424(e) of the Internal Revenue Code.
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1.4 Headings and References. The headings preceding the text of the
articles and sections of this Plan are solely for convenient reference and
neither constitute a part of this Plan nor affect its meaning, interpretation,
or effect. Unless otherwise expressly stated, a reference in this Plan to a
section refers to a section of this Plan.
1.5 Limitation of Rights. Nothing in this Plan, whether express or
implied, is intended or should be construed to confer upon, or to grant to, any
person (other than the Participants and their respective heirs, guardians, and
personal representatives) any claim, right, remedy, or privilege under or
because of this Plan or any provision of it, except that every member of the
Administrative Committee is a third-party beneficiary of the provisions of
sections 2.2 and 2.4. An employee of the Company or any Subsidiary does not have
any claim or right to participate in this Plan, and the grant of a Stock Option
to a Participant does not create or extend any right of the Participant to
continue to serve as an employee of the Company or any Subsidiary, to
participate in any other stock option or employee benefit plan of the Company or
any Subsidiary, or to receive the same employee benefits as any other employee
of the Company or any Subsidiary. Furthermore, an employee's selection as a
Participant does not restrict in any way the right of the Company or a
Subsidiary to terminate at any time the Participant's employment with it either
at will or as provided in any written employment agreement between it and the
Participant.
1.6 Governing Law. The validity, construction, enforcement, and
interpretation of this Plan are governed by the laws of the State of Utah and
the federal laws of the United States of America, excluding the laws of those
jurisdictions pertaining to the resolution of conflicts with laws of other
jurisdictions.
ARTICLE II
PLAN ADMINISTRATION
2.1 Administrative Committee. This Plan will be administered by the
Board of Directors, or, at its election, the Board of Directors may delegate
administration of this Plan to a Board Committee consisting of two or more
directors who are appointed by the Board of Directors and satisfy the criteria
described below. The members of the Board Committee will serve for unspecified
terms at the discretion of the Board of Directors. The Board of Directors has
the exclusive power to increase or decrease the size of the Board Committee,
appoint additional members of the Board Committee, remove a member of the Board
Committee (as such) at any time, with or without cause, and appoint a successor
to fill any vacancy on the Board Committee.
The Board of Directors shall not appoint as a member of the Board
Committee any director who (a) is an officer or employee of the Company, any
Subsidiary, or any parent corporation of the Company or who does not qualify as
an "outside director" for purposes of section 162(m) of the Internal Revenue
Code, (b) receives directly or indirectly from the Company, and Subsidiary, or
any parent corporation of the Company a dollar amount of compensation for
services rendered as a consultant or in any capacity other than as a director
for which disclosure would be required pursuant to Item 404(a) of Regulation S-K
under the Exchange Act and the Securities Act, (c) possess an interest in any
other transaction to which the Company or any Subsidiary was or will be a party
and for which disclosure would be required pursuant to Item 404(a) of Regulation
S-K under the Exchange Act and the Securities Act, or (d) has a business
relationship for which disclosure would be required pursuant to Item 404(b) of
Regulation S-K under the Exchange Act and the Securities Act. If the Board of
Directors is unable to appoint a Board Committee comprising two or more
directors who satisfy the foregoing criteria, or if the Administrative Committee
ceases at any time to comprise directors who satisfy those criteria, the Board
of Directors shall serve as the Administrative Committee for this Plan, and all
grants of Stock Options under this Plan must be approved by the Board of
Directors.
2.2 Power and Authority. Subject to compliance with all applicable
rules and regulations of any relevant authorities, including stock exchanges and
the Securities and Exchange Commission, the Administrative Committee has the
exclusive power and authority, and the sole and absolute discretion, to do
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the following: (a) construe and interpret this Plan; (b) select the Employees
who will be Participants in this Plan; (c) adopt, amend, and rescind forms,
rules, procedures, and regulations relating to this Plan (all of which must be
approved by the Board of Directors if a Board Committee serves as the
Administrative Committee); (d) grant Stock Options under the Plan, either
conditionally or unconditionally; (e) determine when Stock Options will be
granted under the Plan; (f) determine the number of Shares subject to each Stock
Option; (g) determine the Market Value of a Share in accordance with the
provisions of this Plan; (h) determine the terms and conditions of each Stock
Option, including the exercise price (which must comply with section 3.4), the
methods of exercising the Stock Option, the methods for payment of the exercise
price, the time or times when the Stock Option will become exercisable and the
duration of the exercise period (which must not exceed the limitations specified
in section 3.4), the conditions under which the Stock Option will vest and
become exercisable, and any limitations, restrictions, performance criteria, or
forfeiture conditions applicable to the Stock Option or any Shares purchased
pursuant to it; (i) determine the consideration for the grant of each Stock
Option and the consideration to be paid for Shares purchased pursuant to a Stock
Option, which may consist of cash, other Shares, or any combination of the
foregoing; (j) to approve and recommend amendments to the Plan for adoption by
the Board of Directors and (if necessary or desirable) the shareholders of the
Company; (k) to authorize any officer or director of the Company to execute in
the name and on behalf of the Company any agreement, certificate, instrument, or
other document required to carry out the purposes of this Plan; (l) to engage
the services of any agent, expert, or professional advisor in furtherance of the
Plan's purposes; (m) to amend any outstanding Option Agreement, subject to
complying with applicable legal restrictions and obtaining the approval of the
Participant who is a party to the Option Agreement; and (n) to take all other
actions, and make all other determinations, that are advisable or necessary for
the Plan's administration. In the absence of fraud or mis take, any action,
decision, interpretation, or determination by the Administrative Committee will
be final and binding on all persons.
The Board of Directors may reserve to itself any of the power and
authority conferred on the Administrative Committee, and it may exercise all the
power and authority of the Administrative Committee at any time to the exclusion
of any Board Committee. All references in this Plan to the Administrative
Committee include the Board of Directors whenever it is exercising the power and
authority of the Administrative Committee.
2.3 Approval Procedures. All actions and determinations of the
Administrative Committee must be unanimous, unless the Board of Directors is
exercising the power and authority of the Administrative Committee. All actions
and determinations of the Board of Directors with respect to this Plan must be
approved in the manner provided by the Company's Bylaws and applicable corporate
law. Every action or determination of the Administrative Committee that is
expressly required or permitted under this Plan will be valid only if undertaken
pursuant to a vote, consent, or approval that is evidenced by either (a) a
resolution adopted by the affirmative vote of the requisite number of members of
the Administrative Committee at a meeting, or (b) a written consent signed by
the requisite number of members of the Administrative Committee.
The members of the Administrative Committee may execute a written
consent in counterparts. Each executed counterpart will constitute an original
document, and all of them, together, will constitute the same document. A
properly executed written consent will be effective as of the date specified in
it or, if an effective date is not so specified, on the date when it is signed
by the last director whose signature is neces sary to validate it, and will be
valid if it is executed before, after, or concurrently with the action or
determina tion to which it applies.
2.4 Indemnification. A member of the Administrative Committee is not
liable for, and the Company releases each member of the Administrative Committee
from all liability for, any punitive, incidental, compensatory, consequential,
or other damages or obligation to the Company or any Employee, Participant, or
other person for any act or omission by the member of the Administrative
Committee, or by any agent, employee, professional advisor, or other expert used
or engaged by the Administrative Committee,
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if the act or omission does not constitute gross negligence or willful
misconduct and is done or omitted in good faith, on behalf of the Company, and
in a manner reasonably believed by the member of the Administrative Committee to
be both in the best interests of the Company and within the scope of the
authority granted to the Administrative Committee by this Plan. The Company
shall indemnify each member of the Administrative Committee, and shall reimburse
the member from the Company's assets, for any cost, loss, damage, expense, or
liability incurred by the member by reason of any act or omission for which the
member is released from liability pursuant to this section.
ARTICLE III
STOCK OPTIONS AND PARTICIPANTS
3.1 Stock Option Awards. The Administrative Committee may grant Stock
Options to eligible Employees, Officers or Directors from time to time pursuant
to the provisions of this Plan. Every Stock Option granted under this Plan is
intended to qualify as an incentive stock option within the meaning of section
422 of the Internal Revenue Code. In addition, every Stock Option granted to an
Employee, Officer or Director must be evidenced by an Option Agreement between
the Company and the Employee, Officer or Director that will be subject to all
the applicable terms and conditions of this Plan and may contain additional
terms and conditions that are not inconsistent with the provisions of this Plan
and are determined by the Administrative Committee to be desirable or
appropriate. The provisions of each Option Agreement need not be identical.
3.2 Participants. Every Employee, Officer and Director is eligible to
be selected by the Administrative Committee to participate in this Plan. The
Administrative Committee's designation of an Employee, Officer and Director as a
Participant at any particular time does not require the Administrative Committee
to designate that Employee, Officer and Director to receive any Stock Options at
any other time or to receive the same Stock Options as any other Participant at
any time. The Administrative Committee may consider factors that it considers
pertinent in selecting Participants and in determining the terms and conditions
of Stock Options awarded to them, including the following: (a) the consolidated
financial condition of the Company; (b) the expected net income of the Company
for the current or future years; (c) the contributions of an Employee to the
success and profitability of the Company; and (d) the adequacy of the Employee's
other compensation. The Administrative Committee may award Stock Options to an
Employee even if Stock Options previously were granted to the Employee under
this or another plan of the Company or an Affiliate, and whether or not the
previously granted benefits have been fully exercised. An Employee who
participates in another benefit plan of the Company or an Affiliate also may
participate in this Plan.
3.3 Limitations on Option Shares. The total number of Shares that are
authorized to be issued pursuant to the exercise of Stock Options granted under
this Plan is limited to 2,000,000. This amount will be adjusted automatically in
accordance with section 5.1. If a Stock Option lapses, expires, or is canceled,
or terminated as a whole or in part for any reason other than its exercise, the
Shares subject to the unexercised portion of that Stock Option (or the part of
it so canceled or terminated) will be available for the future grant of Stock
Options under this Plan.
If a Participant pays the exercise price for Shares purchased pursuant
to the exercise of a Stock Option by delivering to the Company previously
acquired Shares or by instructing the Company to withhold from the number of
Shares issuable on exercise of the Stock Option a number of Shares sufficient to
pay all or any portion of the total exercise price, the number of Shares
available for future grants of Stock Options under this Plan will be reduced
only by the net amount of Shares issued in connection with the exercise of the
Stock Option (that is the number of Shares issuable pursuant to the exercise of
the Stock Option, less the number of Shares retained by, or delivered to, the
Company in payment of the exercise price).
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3.4 Exercise Price and Dates. The purchase price for each Share
issuable pursuant to the exercise of a Stock Option must be not less than the
Market Value of a Share on the Date of Grant of the Stock Option. Every Stock
Option must expire not later than ten years after its Date of Grant, and, except
as otherwise provided in sections 4.4 and 5.2 or in the Option Agreement, it
will expire on the 90th day following the date when the Participant ceases to be
an Employee. However, if a Participant owns (within the meaning of section
422(b)(6) of the Internal Revenue Code) at the time when a Stock Option is
granted to the Participant stock representing more than 10% of the total
combined voting power of all classes of outstanding stock of the Company, any
Subsidiary, or any parent corporation of the Company, then: (a) the Stock Option
must expire not later than five years after its Date of Grant; and (b) the
exercise price of the Stock Option must be not less than 110% of the Market
Value of a Share on the Date of Grant of the Stock Option.
Stock Options are not exercisable until they have been accepted by the
Participant. An award of a Stock Option to a Participant will be canceled
automatically if the Participant does not accept the award within 30 calendar
days following the date when the Participant is given written notice of the
award. Unless a Participant's Option Agreement expressly provides otherwise,
every Stock Option will be exercisable in serial increments after each Option
Year as follows:
Percentage Exercisable
After Option Year Per Option Year Cumulatively
1 25% 25%
2 25% 50%
3 25% 75%
4 25% 100%
In no event, however, is any Stock Option permitted to be exercisable
during the first six months after its Date of Grant or during the first Option
Year for more than 20% of the Shares subject to the Stock Option. Subject to the
foregoing limitations, the Administrative Committee may impose on an award of a
Stock Option any terms and conditions that it determines to be desirable,
including performance criteria, forfeiture provisions, and additional or
different vesting conditions. Extension of the expiration date of a Stock Option
is not permitted. In calculating the stock ownership of any person for purposes
of the foregoing, the attribution rules of section 424(d) of the Internal
Revenue Code will apply.
3.5 Incentive Stock Option Conditions. Notwithstanding anything in this
Plan or any Option Agreement to the contrary, every Stock Option must satisfy
the following requirements:
(a) The Stock Option must be designated as an incentive
stock option by the Administrative Committee when it is granted;
(b) This Plan must be approved by the shareholders of the
Company within 12 months before or after its effective date;
(c) The maximum number of Shares subject to any Stock Options
granted to a Participant must not result in the Participant having the
right to exercise for the first time during any one calendar year,
under all incentive stock options granted to the Participant under all
benefit plans of the Company, its Subsidiaries, and any parent
corporation of the Company, options to purchase Shares having a Market
Value in excess of $100,000 (determined as of the date of grant of each
incentive stock option); and
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(d) The Incentive Option must satisfy all conditions and
requirements imposed by the Internal Revenue Code for incentive stock
options and any policies adopted by the Administrative Committee with
respect to incentive stock options.
If a Stock Option is granted for a number of Shares having an aggregate
Market Value on the Date of Grant in excess of $100,000, then, notwithstanding
anything in this or the relevant Option Agreement to the contrary, the Stock
Option will be exercisable in each calendar year as to only that number of
Shares having a Market Value on the Date of Grant of not more than $100,000.
However, the number of Shares as to which a Stock Option is exercisable in any
one calendar year is cumulative, so, if the Stock Option is not exercised to the
fullest extent allowed in any one calendar year, the unexercised portion will
accumulate and carry forward to ensuing years.
For example, if in 1998, the Company were to grant an Employee a Stock
Option to purchase 100,000 Shares at an exercise price of $5.00 per share (which
was the then current Market Value), the Stock Option would be exercisable with
respect to only 20,000 Shares during 1998, and the Stock Option would become
exercisable with respect to 20,000 additional Shares in each successive year
(1999 through 2002). If the Participant elected to purchase only 10,000 Shares
pursuant to the Stock Option during 1998, the Participant could purchase up to
30,000 Shares in 1999, and, if no additional purchases were made in 1999, the
Participant could purchase up to 50,000 Shares in 2000 (carry forward of 10,000
Shares from 1998 and 20,000 Shares from 1999; plus 20,000 Shares in 2000).
3.6. Nontransferability of Stock Options. A Participant is prohibited
from transferring a Stock Option, any interest in it, or any right under an
Option Agreement by any means other than by will or the law of descent and
distribution. Any prohibited transfer (whether by gift, sale, pledge,
assignment, hypothecation, or otherwise) will be invalid and ineffective as to
the Company. In addition, a Stock Option and the Participant's rights under it
and the related Option Agreement are not subject to any lien, levy, attachment,
execution, or similar process by creditors. The Company may cancel any Stock
Option by notice to the Participant to whom it was granted, if the Participant
attempts to make a prohibited transfer, or if the Stock Option, any interest in
it, or any right under the related Option Agreement becomes subject to a lien,
levy, attachment, execution, or similar process by any creditor.
ARTICLE IV
EXERCISE OF STOCK OPTIONS
4.1 Exercise Method. Subject to limitations imposed by this Plan and
the Option Agreement, a Participant may exercise a Stock Option as a whole or in
part in increments of at least 100 shares at any time and from time to time
before it expires. A partial exercise of a Stock Option will not affect a
Participant's subsequent right to exercise the Stock Option as to the remaining
Shares subject to the Stock Option. A Stock Option must be exercised for a
number of whole Shares and is not exercisable for a fraction of a Share.
To exercise a Stock Option, a Participant must do the following: (a)
deliver to the Company a written notice of exercise in such form as prescribed
by the Administrative Committee; (b) tender to the Company full payment for the
Shares to be purchased pursuant to the exercise of the Stock Option; (c) pay to
the Company, or make an arrangement satisfactory to the Administrative Committee
for the payment of, any tax withholding required in connection with the exercise
of the Stock Option (including FICA, Medicare, and local, state, or federal
income taxes); and (d) comply with any and all other reasonable requirements
established by the Administrative Committee for the exercise of Stock Options.
The exercise date of a Stock Option will be the date when (i) the Company has
received the written notice of exercise and full payment of the exercise price,
(ii) the Participant has paid to the Company or made a satisfactory arrangement
for the payment of any requisite tax withholding, and (iii) any and all other
requirements of exercise established by the Administrative Committee have been
satisfied.
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4.2 Payment of Exercise Price. A Participant may pay all or any part of
the exercise price and any applicable tax withholding for any Shares to be
purchased pursuant to exercise of a Stock Option by any combination of the
following methods:
(a) By bank draft, money order, or personal check payable
to the order of the Company; or
(b) To the extent approved in advance by the Administrative
Committee, by delivering to the Company a copy of irrevocable
instructions that have been provided by the Participant to a financial
institution or a securities broker-dealer to pay promptly to the
Company all or a portion of the proceeds from either a sale of the
Shares to be purchased pursuant to the exercise of the Stock Option or
a loan to be secured by a pledge of all or a portion of those Shares.
Shares that are transferred to, or withheld by, the Company in payment
of the exercise price or any tax withholding will be valued for purposes of
payment at their Market Value on the exercise date of the Stock Option, as
determined pursuant to section 4.1. The foregoing provision does not preclude
the exercise of a Stock Option by any other proper legal method specifically
approved in advance by the Administrative Committee. The Administrative
Committee shall determine the acceptable methods for tendering or withholding
Shares as payment of the exercise price of a Stock Option and may impose
limitations and prohibitions on the use of Shares to pay the exercise price of a
Stock Option as it considers appropriate for tax, legal, business, or accounting
reasons. No one has the rights of a shareholder with respect to Shares sub ject
to a Stock Option until a certificate representing those Shares has been
delivered to the person exercising the Stock Option.
4.3 Tax Withholding. The Administrative Committee, in its sole
discretion, may require a Participant to pay to the Company when the Participant
exercises a Stock Option the amount (if any) that the Company considers
necessary to satisfy its legal obligation to withhold any local, state, or
federal taxes (including FICA, income, and Medicare taxes) imposed by any
governmental authority as a result of the exercise of the Stock Option, and the
Company may defer delivery of any Shares purchased pursuant to the Stock Option
until it has been paid or indemnified to its satisfaction for those taxes. A
Participant may pay to the Company any requisite tax withholding by any of the
methods of payment authorized for payment of the exercise price for Shares
purchased pursuant to the Stock Option.
If an exercise of a Stock Option does not give rise to any tax
withholding obligation on the date of exercise but is reasonably expected to do
so at a future time, the Administrative Committee (in its sole discretion) may
require the Participant to place the Shares purchased pursuant to the Stock
Option in escrow for the benefit of the Company until tax withholding is
required for the amounts included in the Participant's gross income as a result
of the Participant's exercise of the Stock Option. At that time, the
Administrative Committee (in its discretion) may require the Participant to pay
to it an amount that it considers sufficient to satisfy the tax withholding
obligation incurred by it as a result of the Participant's exercise of the Stock
Option, in which case the Company shall promptly release to the Participant the
escrowed Shares.
4.4 Exercise Conditions. A Participant may exercise a Stock Option only
if the Participant has been in the continuous employment of the Company or a
Subsidiary during the period beginning on the Date of Grant of the Stock Option
and ending on the 90th day before the exercise date. The Administrative
Committee may decide to what extent bona fide leaves of absence for illness,
temporary disability, govern ment or military service, or other reasons will
constitute an interruption of continuous employment. Each Stock Option is
exercisable during the life of the Participant only by the Participant or the
Participant's guardian.
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A Stock Option expires and ceases to be exercisable on the 90th day
after the Participant to whom it was granted ceases to be an Employee, except as
otherwise provided in this Plan and in the Option Agreement. If a Participant's
employment with the Company or a Subsidiary is terminated (voluntarily or
involuntarily), the Participant may exercise her or his Stock Option within 90
calendar days following the date of termination of employment. If a Participant
dies or ceases to be an Employee because of a disability at a time when the
Participant is entitled to exercise a Stock Option, the Stock Option will
continue to be exercisable for one year (365 days) after the Participant's death
or disability by the Participant or the Participant's guardian (in the case of
disability) or the Participant's heir or personal representative (in the case of
death).
Notwithstanding the foregoing, a Stock Option is never exercisable
later than its stated expiration date. After the death, disability, or
termination of employment of a Participant, a Stock Option of the Participant
will be exercisable only with respect to the number of Shares (if any) that
could have been exercised as of the date when the Participant ceased to be an
Employee (subject to any adjustment required by section 5.1). A Stock Option
will terminate to the extent that it ceases to be exercisable for any of the
Shares subject to it.
4.5 Inventions. While employed by the Company or any Subsidiary and
within 30 days after the termination date of a Participant's employment with the
Company or any Subsidiary, every Participant fully and promptly shall disclose
in writing to the Company, and hold in trust for the sole right and benefit of
the Company, all Proprietary Property, whether or not any of the Proprietary
Property is patentable, capable of copyright or trademark registration or is
created, conceived, developed, or reduced to practice during normal working
hours, at the request of the Company or any Subsidiary, or before or after the
execution date of this Agreement.
In furtherance of the foregoing, a Participant shall assign to the
Company all of the Participant's right, title, and interest in and to all
Proprietary Property. While employed by the Company or any Subsidiary and at all
times thereafter, each Participant shall do all things, and execute all
documents, including applications for patents, copyrights, and trademarks and
for renewals, extensions, and divisions thereof, as the Company reasonably may
request to carry out the intent and purposes of this section. If the Company is
unable for any reason whatsoever to obtain a Participant's signature or
assistance, the Participant irrevocably appoints the Company and each of its
duly authorized officers as the Participant's agent and attorney-in-fact, with
full power of substitution, to sign, execute, and file in the name and behalf of
the Participant any document required to prosecute or apply for any foreign or
United States patent, copyright, trademark, or other proprietary protection,
including renewals, extensions, and divisions, and to do all other lawful acts
and things to further the issuance or prosecution of a patent, copyright,
trademark, or other proprietary protection, all with the same legal force and
effect as if done or executed by the Participant.
4.6 Reservation, Listing, and Delivery of Shares. The Company shall
reserve from its authorized but unissued Shares and keep available until the
termination of this Plan, solely for issuance upon the exercise of Stock
Options, the number of Shares issuable at any time pursuant to the exercise of
Stock Options granted or available for grant under this Plan. In addition, the
Company shall take all requisite action to assure that it validly and legally
may issue fully-paid, nonassessable Shares upon the exercise of each Stock
Option. Also, if the Shares are traded in the Nasdaq Stock Market or on any
United States national securities exchange, the Company, at its sole expense,
shall reserve for quotation or listing on that market or exchange, upon official
notice of issuance pursuant to the exercise of Stock Options, the number of
Shares issuable at any time upon the exercise of Stock Options granted or
available for grant under this Plan, and the Company shall maintain that listing
until this Plan terminates.
Promptly after a Stock Option is validly exercised, the Company shall
issue and deliver to the order of the person who exercised the Stock Option a
stock certificate representing that number of fully-paid and nonassessable
Shares that were purchased pursuant to the exercise of the Stock Option, plus,
instead of any
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fractional Share to which that person otherwise would be entitled, a cash sum
equal to the product of (a) that fraction, multiplied by (b) the Market Value of
one full Share as of the exercise date of the Stock Option. The Company shall
pay all costs and excise taxes associated with the original issuance of stock
certificates representing Shares purchased pursuant to the exercise of Stock
Options.
4.7 Legal Compliance. Stock Options are exercisable, and Shares are
issuable under this Plan, only in compliance with all applicable state and
federal laws and regulations (including securities laws) and the rules of all
stock markets or exchanges on which the Shares are quoted or listed for trading.
Any certificate representing Shares issued under the Plan will bear such legends
and statements as the Administra tive Committee considers advisable to assure
compliance with those laws, rules, and regulations. In addition, the
Administrative Committee may require a Participant, as a condition to the grant
or exercise of a Stock Option, to provide to the Company any agreements,
representations, and warranties that, in the opinion of counsel for the Company,
are desirable or necessary to comply with applicable laws and all rules and
regulations of any stock market or exchange on which the Shares are traded or
quoted, including a representation that the Shares issuable pursuant to exercise
of the Stock Option are or will be acquired for investment purposes without a
view to distribute them to others.
A Stock Option is not exercisable, and the Company shall not issue any
Shares under this Plan, until the Company has obtained any consent or approval
required from any state or federal regulatory body having jurisdiction. Upon the
exercise of a Stock Option by an heir, guardian, or personal representative of a
Partici pant, the Administrative Committee may require reasonable evidence of
the person's legal ownership of the Stock Option and any consents and releases
of governmental authorities as it determines are advisable.
ARTICLE V
ADDITIONAL PROVISIONS
5.1 Antidilution. If the Company does any of the following (a "Dilutive
Event") at any time before the exercise or expiration of a Stock Option: (a)
splits or subdivides its then-outstanding Shares into a greater or different
number of Shares; (b) reduces the then-outstanding number of Shares by a reverse
stock-split or by otherwise combining those Shares into a smaller number of
Shares or as a result of the cancellation or return to the Company of Shares in
settlement of any claim by the Company that the Shares were not validly issued
or authorized or fully paid for; (c) effects any other capital adjustment,
recapitalization, reorganization, or reclassification that has the effect of
increasing or decreasing propor tionately the number of outstanding Shares then
held by each shareholder; (d) distributes any of its assets to its shareholders
pro rata as a partial liquidation or return of capital; or (e) declares, issues,
or distributes to the holders of its Common Stock, without separate payment
therefor, (i) a noncash dividend payable in any property or securities of the
Company, including additional Shares, (ii) any cash, property, or securities in
connection with a spin-off, split-up, reclassification, recapitalization,
combination of shares, or similar rearrangement of the Company's capital stock;
or (iii) any securities in exchange, conversion, or substitution for any of the
Shares then outstanding, whether pursuant to a merger, split-up, spin-off, share
exchange, consolidation, reorganization, recapitalization, reclassification, or
otherwise; then, upon the subsequent exercise of a Stock Option after the record
date for, or the occurrence of, each Dilutive Event, the Participant will be
entitled to receive in exchange for the exercise price specified in the Stock
Option, and in addition to (or in substitution for) the Shares otherwise
issuable upon exercise of the Stock Option, the additional (or different) amount
of Shares and other securities and property (including cash) resulting from the
Dilutive Event that the Participant would have been entitled to receive if (A)
the Participant had exercised the Stock Option on the Date of Grant (even if the
Stock Option was not exercisable then) and had been the record owner of the
number of Shares issuable pursuant to the Stock Option during the period
beginning on that date and ending on the actual exercise date of the Stock
Option, and (B) the Participant had retained all Shares and other securities and
property (including cash) receivable by the Participant during that period,
after giving effect to all the Dilutive Events that occurred during that period.
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The number of Shares issuable pursuant to Stock Options granted or
available for grant under this Plan and the exercise price per Share of those
Stock Options will be proportionately adjusted automatically to account for any
increase or decrease in the number of issued Shares that occurs during the term
of this Plan and results from a stock split, stock dividend, recapitalization,
or other reduction, subdivision, or consolidation of Shares that proportionately
increases or decreases the number or percentage of outstanding Shares then held
by each shareholder of the Company, except for a repurchase of Shares by the
Company in exchange for cash, Shares, or other property, but including the
cancellation or return to the Company of Shares in settlement of any claim by
the Company that the Shares were not validly issued or authorized or fully paid
for.
For example, if the Company were to effect a two-for-one stock split,
the maximum number of Shares issuable pursuant to this Plan would be increased
from 2,000,000 to 4,000,000, and the exercise price and number of Shares
issuable under an outstanding Stock Option for 100 Shares at an exercise price
of $5.00 per Share would be changed to 200 Shares at an exercise price of $2.50
per Share. Similarly, if the Company were to effect a one-for-ten reverse stock
split, the maximum number of Shares issuable pursuant to this Plan would be
decreased from 2,000,000 to 200,000, and the exercise price and number of Shares
issuable under an outstanding Stock Option for 100 Shares at an exercise price
of $5.00 per Share would be changed to 10 Shares at an exercise price of $50.00
per Share. No adjustment of the number of shares issuable pursuant to this Plan
or upon exercise of a Stock Option will be made to account for the issuance by
the Company of any shares of any class of stock other than as specifically
provided above or of any securities that are convertible into Shares.
5.2 Changes in Control. If a Change in Control occurs, every Stock
Option that has been outstanding for at least six months since its Date of Grant
will automatically become fully vested and exercisable in full, and any and all
conditions and restrictions applicable to the Stock Option and the Shares issued
pursuant to it will automatically lapse. The Company shall notify each
Participant of the occurrence of any event that constitutes a Change in Control.
If a Change in Control constitutes a dissolution or complete
liquidation of the Company, then, notwithstanding anything to the contrary in
this Plan or an Option Agreement, this Plan and every outstanding Stock Option
will terminate immediately before the effective time of the dissolution of the
Company and at 5:00 P.M., New York time, on the 15th business day after the date
when the Company mails to all the Participants written notice that its
shareholders have approved a plan of complete liquidation of the Company.
If the Change in Control constitutes a merger, consolidation,
reorganization, share exchange, or a negotiated tender offer or exchange offer,
each Stock Option will be subject to the agreement between the Company and the
acquiring corporation that governs the transaction. That agreement may provide
for any of the following: (a) the assumption of outstanding Stock Options by the
surviving corporation or its parent corporation; (b) the continuation of
outstanding Stock Options, if the Company is the surviving corporation; (c) the
payment by the Company of a cash sum for the cancellation of each outstanding
Stock Option, in full settlement of all the Participant's rights and interests
in the Stock Option, and instead of the Shares that the Participant otherwise
would have been titled to receive upon the exercise of the Stock Option, in an
amount equal to the product of (i) the total number of unexercised Shares
issuable under the Stock Option multiplied by (ii) the difference between
highest net cash price paid or offered to shareholders of the Company for one
Share under the agreement and the exercise price per share of the Stock Option;
or (d) for the cancellation and termination of Stock Options that are not
exercised before the effective date of the transaction; in all cases other than
clause (c) without the Participants' consent. The written consent of each
Participant whose Stock Option is canceled is required for a cash settlement
pursuant to clause (c).
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5.3 Amendment and Termination. The Board of Directors may alter, amend,
suspend, or terminate this Plan at any time without approval of the Company's
shareholders, unless the approval of the Company's shareholders is required to
comply with applicable law or any rule or regulation of a stock market or
exchange on which the Shares are traded or quoted. An amendment or termination
of this Plan, whether with or without the approval of the Company's
shareholders, that would adversely affect any right or obligation of a
Participant under an outstanding Stock Option will not be valid or effective as
to that Stock Option without that Participant's written consent.
5.4 Expenses and Proceeds. The Company shall pay all expenses of the
Plan. The Company may use the cash proceeds received from Participants upon the
exercise of Stock Options for general corporate purposes.
5.5 Market Value Determinations. If trading in the Shares, or a price
quotation for the Shares, does not occur on a date when the Market Value is
required to be determined under either this Plan or an Option Agreement, the
next preceding date when Shares were traded or a price was quoted will control
the determination of the Market Value.
5.6 Section 16(b) Exemptions. With respect to Participants subject to
section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of SEC Rules 16b-3 and 16b-6 and any rule
promulgated by the United States Securities and Exchange Commission under the
Exchange Act in substitution for either of those rules. To the extent any
provision of this Plan or action by the Administrative Committee fails to so
comply, it shall be null and void to the extent permitted by law and determined
by the Administrative Committee. In furtherance of the foregoing objective, the
Administrative Committee may include in an Option Agreement with a Participant
who is subject to section 16 of the Exchange Act any additional conditions or
restrictions that are required to qualify the grant and exercise of the Stock
Option for exemption under Rules 16b-3 and 16b-6 or any future rule providing an
exemption for the award, grant, and exercise of stock options.
5.7 Duration and Effective Date. This Plan will become effective as of
the date when it is adopted by the Board of Directors, subject to approval by
the Company's shareholders within 12 months after that date, and will terminate
on the tenth anniversary of its effective date. The Company is not authorized to
award any Stock Options after the termination date of this Plan.
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