TOTAL RESEARCH CORPORATION
5 Independence Way
Princeton, New Jersey 08543
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
Page
General Information
Board of Directors Proposal No. 1
Election of Directors
Board Committees
Director Compensation
Director and Executive Officer Stock Ownership
Information Concerning Executive
Officers
Report of the Compensation Committee on
Executive Compensation
Executive Compensation
Stock Performance Graph
Certain Relationships and Related Transactions
Agreements with Directors
Board of Directors Proposal No. 2
Approval of Amendments to 1995 Stock Option Incentive
Plan
Board of Directors Proposal No. 3
Ratification of Appointment of Independent Auditors
Fiscal Year 1998 Annual Report and Form 10-KSB
Additional Information
IMPORTANT
STOCKHOLDERS ARE REQUESTED TO DATE, SIGN AND MAIL THE ENCLOSED PROXY. A POSTAGE
PAID ENVELOPE IS PROVIDED
<PAGE>
TOTAL RESEARCH CORPORATION
5 INDEPENDENCE WAY
PRINCETON, NEW JERSEY 08543
PROXY STATEMENT
GENERAL INFORMATION
-------------------
Who may vote
- ------------
Shareholders of Total Research Corporation ("Total Research" or the "Company"),
as recorded in our stock register on November 6, 1998, may vote at the meeting.
How to vote
- -----------
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
How proxies work
- ----------------
The Company's Board of Directors (the "Board") is asking for your proxy. Giving
us your proxy means you authorize us to vote your shares at the meeting in the
manner you direct. You may vote for all, some, or none of our director
candidates. You may also vote for or against the other proposals or abstain from
voting.
If you sign and return the enclosed proxy card but do not specify how to vote,
we will vote your shares in favor of our director candidates and in favor of the
two management proposals.
You may receive more than one proxy or voting card depending on how you hold
your shares. Shares registered in your name are covered by one card. The
Company's employees receive a separate card for any shares held in the Company's
1995 Stock Incentive Plan. If you hold shares through someone else, such as a
stockbroker, you may get material from them asking how you want to vote.
Revoking a proxy
- ----------------
You may revoke a proxy before it is voted by submitting a new proxy with a later
date; by voting in person at the meeting; or by notifying the Company's
Secretary in writing at the address listed under "Questions?" on page 15.
Confidential Voting
- -------------------
Independent inspectors count the votes. Your individual vote is kept
confidential from us unless special circumstances exist. For example, a copy of
your proxy will be sent to us if you write comments on the card.
Quorum
- ------
In order to carry on the business of the meeting, we must have a quorum. This
means at least a majority of the outstanding shares eligible to vote must be
represented at the meeting, either by proxy or in person. Shares owned by Total
Research are not voted and do not count for this purpose.
<PAGE>
Votes needed
- ------------
The director candidates receiving the most votes will be elected to fill the
seats on the Board. Approval of the other proposals requires a favorable vote of
a majority of the votes cast. Only votes for or against a proposal count.
Abstentions and broker non-votes count for quorum purposes but not for voting
purposes. Broker non-votes occur when a broker returns a proxy but does not have
the authority to vote on a particular proposal.
Attending in person
- -------------------
Only shareholders, their proxy holders, and the Company's guests may attend the
meeting.
If you hold your shares through someone else, such as a stockbroker, bring proof
of your ownership to the meeting. Acceptable proof could include an account
statement showing that you owned Total Research shares on November 6, 1998.
Cost of proxy
- -------------
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others who forward solicitation
material to beneficial owners of common stock.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
---------------------
(ITEM 1 ON THE PROXY CARD)
The Board has nominated the director candidates named below.
The Board of Directors oversees the management of the Company on your behalf.
The Board reviews the Company's long-term strategic plans and exercises direct
decision-making authority in essential areas, such as the granting of options.
Just as important, the Board chooses the Chief Executive Officer, sets the scope
of his authority to manage the Company's day-to-day business, and evaluates his
performance.
A majority of Total Research directors--5 out of 8 nominees--are not employees.
All Total Research directors are elected for one-year terms.
Personal information on each of our nominees is given below. All of our nominees
currently serve as members of the Board; three directors, Messrs. Brodsky,
Shecter, and Lindemann, joined the Board in July 1998. The remaining Board
members were elected by shareholders at the last shareholders meeting.
The Board met eight times last year. All members of the Board attended 100% of
the Board and committee meetings occurring while they were members of the Board.
If a director nominee becomes unavailable before the election, your proxy card
authorizes us to vote for a replacement nominee if the Board names one.
The Board recommends you to vote FOR each of the following candidates:
David Brodsky.................... Mr. Brodsky has been Chairman of the Board
Age 61 of Directors of the Company since July
Director since July 1998 1998. He has been a private investor
during the past five years.
Howard Shecter................... Since 1973, Mr. Shecter has been a partner
Age 55 in the law firm of Morgan, Lewis, &
Director since July 1998 Bockius, LLP. Mr. Shecter served as a
managing partner of Morgan, Lewis, &
Bockius LLP from 1979 to 1983 and was the
Chairman of the Executive Committee of
that firm in 1985. Mr. Shecter is also
a director of Safeskin Corporation.
Albert Angrisani................. Mr. Angrisani has been President and Chief
Age 49 Executive Officer since July 1998. From
Director since 1994 April 1998 to July 1998, Mr. Angrisani was
aconsultant to the Company and acted in a
capacity similar to that of a chief
executive officer. From January 1993 to
April 1998, Mr. Angrisani was the
President of the Princeton-Potomac
Management Company, a consulting and
financial services firm.
George Lindemann................. Mr. Lindemann has been Chairman of the
Age 62 Board of Directors and Chief Executive
Director since July 1998 Officer of Southern Union Company since
February 1990. He has been President and a
director of Cellular Dynamics, Inc., the
managing general partner of Activated
Communications Limited Partnership, a
private investment business, since 1982.
Lorin Zissman.................... Mr. Zissman, founder of the Company,
Age 68 become Chairman Emeritus of the Board of
Director since 1975 Directors in April 1998. Mr. Zissman
served as Chairman of the Board of
Directors and Chief Executive Officer of
the Company from its founding in 1975 to
April 1998.
Anthony Galli.................... Mr. Galli has been a principal of Galli
Age 71 Associates, a public relations consulting
Director since 1990 firm, since January 1997. Prior to that
time, he was Vice President and General
Manager of the New Jersey/Delaware office
of Hill & Knowlton , a public relations
firm.
J. Edward Shrawder............... Mr. Shrawder has been the Chief Financial
Age 57 Officer of Kent Research, a marketing
Director since 1993 research firm located in Illinois, since
1993.
Roger Thomas..................... Mr. Thomas has been the President of the
Strategic Marketing Services division of
the Company since July 1996. From 1993 to
November 1994, Mr. Thomas was Managing
Director of British Marketing Services, a
United Kingdom market research firm. From
November 1994 to July 1996, he was
Managing Director of Total Research -
Europe, the Company's European Division.
BOARD COMMITTEES
The Board appoints committees to help carry out its duties. In particular,
committees work on key issues in greater detail than would be possible at Board
meetings. Each committee reviews the results of its meetings with the full
Board.
The Audit Committee is responsible for accounting and internal control matters.
Subject to shareholder approval, the Audit Committee chooses the independent
public accountants to audit the Company's financial statements. The Audit
Committee consults the Company's independent accountants and reviews their audit
and other work. The Audit Committee also consults with the Company's Chief
Financial Officer and Controller and reviews internal controls and compliance
with the Company's accounting policies. The Committee met twice during the
fiscal year ended June 30, 1998. The Audit Committee consists of Mr. Lindemann
(Chairman) and Mr. Brodsky.
The Compensation Committee establishes salaries, bonuses, and other forms of
compensation for executives of the Company and such other employees of the
Company as assigned thereto by the Board. The Compensation Committee is also
responsible for administering the Company's 1995 Stock Incentive Plan. The
Compensation Committee met four times during the fiscal year ended June 30,
1998. The Compensation Committee consists of Messrs. Brodsky (Chairman), Shecter
and Angrisani.
The Executive Committee has broad power to act on behalf of the Board. This
committee was established in July 1998. The Executive Committee consists of
Messrs. Brodsky (Chairman), Angrisani, Shecter and L. Zissman.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no cash compensation for
serving on the Board of Directors. Non-employee directors are reimbursed for
their out-of-pocket expenses in attending Board meetings. Each director receives
50,000 stock options upon joining the Board of Directors and 10,000 stock
options at the end of each year of service on the Board of Directors. See also
"Certain Relationships and Related Transactions - Agreements with Directors."
DIRECTOR AND EXECUTIVE OFFICER STOCK OWNERSHIP
The following table sets forth information, as of October 27, 1998,
concerning the Common Stock of the Company beneficially owned by (1) each
director and executive officer of the Company and (2) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Shares Beneficially Owned Percent of
Outstanding Shares
<S> <C> <C>
Albert Angrisani(1) 43,333 *
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Lorin Zissman 2,077,617 18.2%
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Eric Zissman 126,937 1.1%
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Richard G. Morrow, Jr.(2) 12,600 *
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Roger Thomas(3) 200,000 1.8%
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Theresa Flanagan 29,000 *
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Patti Hoffman 42,000 *
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Mark Nissenfeld, Ph.D. 29,842 *
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
</TABLE>
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Shares Beneficially Owned Percent of
Outstanding Shares
<S> <C> <C>
David Brodsky(4) 578,961 5.0%
c/o Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Anthony Galli(5) 44,333 *
c/o Galli Associates
P.O. Box 7175
Princeton, New Jersey 08543
George L. Lindemann(6) 283,050 2.5%
c/o Southern Union Company
767 Fifth Avenue, 50th Floor
New York, New York 10153
Howard Shecter(7) 303,050 2.6%
c/o Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
J. Edward Shrawder(8) 112,111 *
c/o Kent Research
1716 Livingston Street
Evanston, Illinois 60201
All directors and executive officers as a group (13 3,867,834 32.6%
persons) (9)
--------------------
* Less that 1%
(1) Includes 28,333 shares subject to options exercisable within 60 days.
(2) Includes 12,500 shares subject to options exercisable within 60 days.
(3) Includes 50,000 shares subject to options exercisable within 60 days.
(4) Includes 120,000 shares subject to options exercisable within 60 days.
(5) Includes 24,333 shares subject to options exercisable within 60 days.
(6) Includes 90,000 shares subject to options exercisable within 60 days.
(7) Includes 90,000 shares subject to options exercisable within 60 days.
(8) Includes 43,333 shares subject to options exercisable within 60 days.
(9) Includes an aggregate of 443,166 shares subject to options exercisable within 60 days.
</TABLE>
INFORMATION CONCERNING Executive Officers
The following table provides certain information as of October 27,
1998, about each of the Company's executive officers.
NAME POSITION(S) WITH COMPANY
---- ------------------------
Albert Angrisani President, Chief Executive Officer and Director
Eric Zissman Chief Financial Officer and Treasurer
Richard G. Morrow, Jr. Vice President, Controller and Secretary
Roger Thomas President - Strategic Marketing Services Division
and Director
Terri Flanagan President - Customer Loyalty Division
NAME POSITION(S) WITH COMPANY
---- ------------------------
Patti Hoffman President - U.S. Regional Offices Division
Mark Nissenfeld, Ph.D. President - Global Health Care Division
The business experience, principal occupation, employment and certain
other information concerning each of the Company's executive officers is set
forth below. Personal information about Mr. Angrisani and Mr. Thomas is given
above.
Eric Zissman, the son of Lorin Zissman, has been Chief Financial
Officer and Treasurer of the Company since October 1996. Mr. Zissman joined the
Company in 1988 and served as Vice President - Accounting from June 1993 to
October 1996.
Richard G. Morrow, Jr., has been Vice President and Controller of the
Company since July 1996. He became Secretary of the Company in September 1997.
From January 1993 to April 1996, Mr. Morrow was a financial analyst at
Rhone-Poulenc-Rorer, an international pharmaceutical company.
Terri Flanagan became President of the Customer Loyalty division of the
Company in July 1996. Ms. Flanagan joined the Company in 1983 and served as
Senior Vice President from June 1993 to July 1996.
Patti Hoffman has been President of U .S. Regional Offices division of
the Company since June 1996. Ms. Hoffman joined the Company in February 1995 as
Vice President-Human Resources. Prior to that time, Ms. Hoffman was an
independent human resources consultant.
Mark Nissenfeld, Ph.D., became President of the Global Health Care
division of the Company in July 1996. Dr. Nissenfeld joined the Company in June
1993 as Research Director of the Company and Managing Director of the Global
Health Care division.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves the compensation of executives
of the Company and such other employees of the Company as assigned thereto by
the Board and makes recommendations to the Board with respect to standards for
setting compensation levels. The Compensation Committee adopted the Report on
Executive Compensation set forth below.
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation for fiscal 1998 consisted of two primary
components: base salary and bonus. The level of each executive officer's base
salary and bonus is established in such officer's employment agreement. See
"Certain Relationships and Related Transactions - Employment Agreements".
The salary and bonus components of the Company's executive compensation are
together designed to facilitate fulfillment of the following compensation
objectives: (i) retaining competent management; (ii) rewarding management for
the attainment of short and long term accomplishments; (iii) aligning the
interests of management with those of the Company stockholders; and (iv)
relating executive compensation to the achievement of the Company's goals and
financial performance.
Base Salary. the base salary of each of the Executive Officers in
fiscal 1998 was paid in accordance with the terms of their respective employment
agreements.
Bonuses. The Compensation Committee believes that the awarding of
annual bonuses provides an incentive and reward for short-term financial success
and long-term Company growth. The bonus component of the long-term employment
agreements of each of the Executive Officers is intended to link comopensation
in significant part to the Company's financial performance and the attainment of
the Company's goals. The bonus earned by each of the Executive officers was
calculated in accordance with a formula set forth such officer's employment
agreement which entitles such officer to a bonus based on the Company's
financial performance for each fiscal year. See "Certain Relationships and
Related Transactions - Employment Agreements".
Stock Options. The Company uses stock options as a long-term, non-cash
incentive and to align the long-term interests of executive officers and
stockholders of the Company. Stock options are awarded based upon the market
price of the Common Stock on the date of grant and are linked to future
performance of our stock because they do not become valuable to the holder
unless the price of our stock increases above the price on the date of grant.
The number of stock options granted to an executive officer as a form of
non-cash compensation is determined by the following factors: (1)number of stock
options previously granted to an executive officer; (ii) the executive officer's
remaining options exercisable; and (iii) the value of those remaining stock
options as compared to the anticipated value that an executive officer will add
to the Company in the future.
Compensation of the Chief Executive Officer. The compensation package
of Mr. Angrisani, the Company's President and Chief Executive Officer, primarily
consists of base salary and bonus components. The levels of base salary and
bonus, as well as the factors considered in determining such levels, are
established by Mr. Angrisani's Employment Agreement.
From April 1998 to July 1998, Mr. Angrisani was a consultant and acted
in a capacity similar to that of a Chief Executive Officer. In fiscal 1998, Mr.
Angrisani earned a base salary of $175,000 and a bonus of $43,900. In addition,
pursuant to his employment agreement, Mr. Angrisani receives certain other
customary perquisites and benefits. As of October 27, 1998, Mr. Angrisani
beneficially owned 43,333 shares of options to purchase 500,000 shares of Common
Stock, subject to certain terms and conditions.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned, whether paid or
deferred, by the Company's chief executive officer, its former chief executive
officer and its other four most highly compensated executive officers during the
fiscal year ended June 30, 1998 (collectively, the "Named Executive Officers"),
for services rendered in all capacities to the Company during the fiscal years
ended June 30, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
Long-Term Compensation
Awards All Other
Annual Compensation Securities Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options (#) ($)
- --------------------------- ---- ---------- --------- ----------- ---
<S> <C> <C> <C> <C> <C>
Albert Angrisani 1998 175,000(2) 43,900 -
President and Chief 1997 120,000(2) 40,000 335,000(4) -
Executive Officer (1) 1996 41,925(2) 35,000 185,000 -
Lorin Zissman 1998 260,000 26,000 - 67,598(5)
Chairman Emeritus(3) 1997 208,000 40,000 - 35,950(5)
1996 208,000 - - 35,966(5)
Eric Zissman 1998 120,000 32,900 - 17,066(6)
Chief Financial Officer and 1997 100,000 40,000 250,000(4) 4,075(7)
Treasurer 1996 74,000 25,000 50,000 3,014(7)
Patti Hoffman 1998 120,000 32,800 - 4,140(7)
President - U.S. Regional 1997 100,000 40,000 250,000(4) 4,229(7)
Offices division 1996 81,600 25,000 55,000 1,478(7)
Mark Nissenfeld, Ph.D. 1998 120,000 32,000 - 4,140(7)
President - Global 1997 110,000 40,000 250,000(4) 4,750(7)
Health Care division 1996 90,000 45,000 50,000 4,206(7)
Terri Flanagan 1998 120,000 6,000 - 3,695(7)
President - Customer 1997 100,000 40,000 250,000(4) 4,218(7)
Loyalty division 1996 100,000 - - 2,990(7)
Roger Thomas 1998 130,000 30,000 - 20,426(8)
President - Strategic 1997 125,000 40,000 250,000(4) 13,175(9)
Marketing Services division 1996 120,000 7,875 - 13,025(9)
----------------------------
</TABLE>
(1) Mr. Angrisani formally assumed the responsibilities of President and
Chief Executive Officer of the Company on July 1, 1998. Prior to that
time, Mr. Angrisani was a consultant to Company and from April 1998 to
July 1, 1998, he acted in a similar capacity to a chief executive
officer.
(2) Represents fees paid to Mr. Angrisani in his capacity as a consultant
to the Company.
(3) Mr. Zissman has been Chairman Emeritus since April 1998. Prior to that
time, Mr. Zissman served as Chief Executive Officer and Chairman of the
Board of Directors of the Company.
(4) The Company granted 250,000 stock options to each of Mr. Angrisani,
Eric Zissman, Ms. Hoffman, Dr. Nissenfeld, Ms. Flanagan and Mr. Thomas
upon the execution of their respective employment agreements with the
Company during fiscal 1997. Such stock options vest in June 1999,
provided that certain corporate performance goals are met.
(5) Represents premiums paid by the Company on a life insurance policy for
the benefit of the estate of Mr. Zissman and the Company's match on
employee 401(k) contributions. For fiscal 1998, it also represents
payment for accrued but unused vacation days.
(6) Represents the Company's match on employee 401(k) contributions and
payment for accrued but unused vacation days.
(7) Represents the Company's match on employee 401(k) contributions.
(8) Represents housing and automobile allowance paid to Mr. Thomas.
(9) Represents automobile allowance paid to Mr. Thomas.
STOCK OPTION HOLDINGS TABLE
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying in-the-money
Shares Unexercised Options at
------- - ------------ ----------
Acquired on Value Options at Year-End Fiscal Year-End (1)
----------- ------ - -------------------- -------------------
Name Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
(#) ($) (#) ($)
<S> <C> <C> <C> <C>
Angrisani, Albert - - 13,333/506,667 32,083/1,389,792
Flanagan, Theresa 25,000 28,125 0/250,000 0/703,125
Hoffman, Patti - - 60,000/250,000 153,438/703,125
Nissenfeld, Mark - - 50,000/250,000 131,250/703,125
Thomas, Roger - - 50,000/250,000 148,435/703,125
Zissman, Eric 8,771 31,250 50,000/250,000 131,250/703,125
Zissman, Lorin 38,517 205,625 0/0 0/0
- -----------------------
</TABLE>
1) Market value of underlying shares of Common Stock, based on the
average of the high and low sales price ($3.625), on June 30,
1998, minus the aggregate exercise price.
PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's common
stock compared to the cumulative total return for the Nasdaq Composite and the
Nasdaq National Industrial Index. The graph assumes an investment of $400 on
January 31, 1994 in Total Research Common Stock.
[INSERT GRAPH]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Albert Angrisani, pursuant
to which he serves as President and Chief Executive Officer of the Company for a
three year term ending June 30, 2001, at an annual salary of $175,000, subject
to adjustment by the Executive Committee of the Board of Directors in fiscal
years 2000 and 2001. Mr. Angrisani is also entitled to receive a bonus of up to
$125,000 per annum based upon the Company's financial performance. If Mr.
Angrisani's employment is terminated by Company for any reason other than Cause
(as defined therein) or disability or following a Change in Control (as defined
therein), or Mr. Angrisani terminates his employment for Good Reason (as defined
therein), then the Company is obligated to pay him a lump sum cash severance
payment of $1,000,000, in addition to continuing to provide all employee
benefits to Mr. Angrisani and his family for the remainder of the Term (as
defined therein) and all options held by Mr. Angrisani would vest immediately.
Mr. Angrisani has agreed not to engage in a Competing Business (as defined
therein) during the Term and for a period of one year thereafter, subject to
certain exceptions. Mr. Angrisani's employment agreement provides for three
non-collateralized annual loans of $100,000 each from the Company. The entire
principal and interest on such loans will be due on June 30, 2001; provided,
that the entire amount may forgiven under certain circumstances described in Mr.
Angrisani's employment agreement.
The Company has entered into an employment agreement with each of Eric
Zissman, Terri Flanagan, Patti Hoffman, Mark Nissenfeld and Roger Thomas,
pursuant to which each serves as an executive officer of the Company for a two
and one-half year term ending June 30, 1999. Each agreement, as amended by the
Compensation Committee of the Board of Directors in November 1997, provides that
the applicable executive officer's annual base salary is $130,000 for the period
from July 1, 1998 through June 30, 1999 and that such executive officer will be
entitled to receive an annual bonus based upon the Company's financial
performance. Each of such executive officers is entitled to participate in all
benefit plans offered by the Company. Each such executive officer has agreed not
to solicit any of the Company's clients or employees for a period of two years
following the termination of his or her respective employment agreement. Each
such executive officer was granted 250,000 stock options under the respective
employment agreements. Such stock options vest on June 30, 1999; provided, that
if any of such executive officer's employment is terminated for performance or
cause, such executive officer's options shall not vest at all and if any of such
executive officer's employment is terminated for any reason other than
performance or cause, such executive officer's options shall vest immediately.
AGREEMENTS WITH DIRECTORS
The Company has arrangements with David Brodsky and Howard Shecter
whereby Mr. Brodsky will receive $75,000 during fiscal 1999 and Mr. Shecter will
receive $50,000 during fiscal 1999 in consideration for their services relating
to acquisitions by the Company.
PROPOSAL NO. 2:
---------------
APPROVAL OF AMENDMENTS TO
1995 STOCK INCENTIVE PLAN
(ITEM 2 ON THE PROXY CARD)
AMENDED 1995 STOCK INCENTIVE PLAN
At the Meeting, the shareholders will be asked to approve the Company's
1995 Stock Incentive Plan as amended and restated effective September 23, 1998
(the "1995 Plan"). In September 1998, the Company's Board of Directors voted to
increase the aggregate maximum number of shares of common stock of the Company
("Common Stock") that may be issued under the 1995 Plan from 1,750,000 to
2,500,000. On September 23, 1998, the Board of Directors amended and restated
the 1995 Plan in order to (i) reflect the increase in the aggregate maximum
number of shares that may be issued under the 1995 Plan from 1,750,000 to
2,500,000; (ii) specify the aggregate maximum number of shares that may be
issued under options granted to any individual participant under the 1995 Plan;
and (iii) comply with the 1996 changes to Section 16 of the Securities Exchange
Act of 1934, as amended, (the "Exchange Act") and the rules and regulations
promulgated thereunder. Approval of the 1995 Plan as amended and restated
requires the affirmative vote of the holders of a majority of the shares
present, in person or by proxy, at the Meeting and entitled to vote.
The Board of Directors believes that the 1995 Plan as amended is
necessary for the Company to attract and retain the services of selected
employees and officers (collectively, "Key Employees") and directors and
consultants (together with Key Employees, "Eligible Individuals") and to
motivate them to exercise their best efforts on behalf of the Company and any
subsidiary or parent of the Company (a "Related Corporation"). The 1995 Plan
provides for the issuance of restricted stock and the granting of incentive
stock options ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), non-qualified stock options ("NQSOs"),
stock bonuses, and stock appreciation rights ("SARs") to Eligible Individuals of
the Company and any Related Corporation.
The Company has two additional plans which provide for the granting of
options: (i) a plan established in 1986 for the granting of ISOs and NQSOs to
Key Employees, non-employee directors, and consultants of the Company (the "1986
Plan"); and (ii) a plan established effective August 1996 for the issuance of
restricted stock and the granting of ISOs, NQSOs, stock bonuses, and SARs to Key
Employees, non-employee directors, and consultants of Total Research, Ltd. (the
"Ltd. Plan"). The 1995 Plan supplements the 1986 and the Ltd. Plans for the
following reasons: (i) the 1986 Plan, by its terms, does not permit options to
be granted after June 30, 1996; and (ii) awards under the Ltd. Plan may only be
made to certain foreign employees of the Company.
SUMMARY OF THE 1995 PLAN
The text of the 1995 Plan as amended and restated is attached as an
Appendix to this Proxy Statement and is marked to indicate changes from the 1995
Plan as it existed prior to its amendment and restatement. The following
description of the 1995 Plan is intended merely as a summary of its principal
features and is qualified in its entirety by reference to the provisions of the
1995 Plan itself:
1. Stock Available Under Plan. The 1995 Plan authorizes up to
an aggregate of 2,000,000 shares of the Company's Common Stock for the granting
of ISOs, NQSOs, restricted stock, and stock bonus awards. No more than 250,000
shares of Common Stock are available for options granted to any one Eligible
Individual under the 1995 Plan. (An Eligible Individual who receives an option
grant is hereinafter referred to as an "Optionee.") Authorized but unissued
shares or reacquired shares may be issued under the 1995 Plan, and the Company
may purchase shares required for this purpose, from time to time, if it deems
such purchase to be advisable.
The closing price of a share of Common Stock on the Nasdaq SmallCap
Market on September 30, 1998, was $2.6875.
2. Administration. The 1995 Plan is administered by the
Compensation Committee (the "Committee"), whose members are designated by the
Company's Board of Directors. The Committee must consist of at least two
directors who are "non-employee" directors within the meaning of Rule 16b-3
under the Exchange Act. In addition, each member of the Committee must also be
an "outside director" within the meaning of Treasury Regulation
ss.1.162-27(e)(3) or any successor provision. If the Committee does not consist
solely of two or more non-employee directors (within the meaning of Rule 16b-3),
each option must be approved by the full Board. The Committee currently consists
of Messieurs. David Brodsky, Al Angrisani, and Howard Shecter. The Committee has
the authority to (i) select the Eligible Individuals to be granted awards under
the 1995 Plan; (ii) grant options, SARs, stock bonuses, and issue restricted
stock on behalf of the Company; and (iii) set the date of grant and other terms
of awards made under the 1995 Plan, including the times and the price at which
options will be granted. The Committee has no discretion with respect to NQSOs
granted to non-employee directors under the formula discussed below.
3. Eligibility. Only employees of the Company and/or a Related
Corporation are eligible to receive ISOs under the 1995 Plan. NQSOs may be
granted to all Eligible Individuals. As of June 30, 1998, there were
approximately 200 employees eligible to receive ISOs and approximately 250
individuals eligible to receive NQSOs. Non-employee directors of the Company are
eligible to receive NQSOs under the 1995 Plan in accordance with a formula
discussed below. As of June 30, 1998, there were approximately 5 non-employee
directors eligible for participation in the 1995 Plan. Consultants to the
Company are also eligible to receive awards under the 1995 Plan. As of June 30,
1998, consultants were eligible to participate in the 1995 Plan.
4. Options Granted to Employees and Consultants. The exercise
price of options granted to employees and consultants under the 1995 Plan is
determined by the Committee, and must be at least equal to the fair market value
of the shares of Common Stock on the date of grant (110% of fair market value
for an ISO granted to a more than 10% shareholder).
Options granted to employees and consultants under the 1995 Plan may
not extend for more than ten years from the date of grant (five years from the
date of grant in the case of an ISO), and become exercisable in such
installments and on such dates as the Committee may specify, but not earlier
than six months from the date of grant, except in limited circumstances. Options
generally terminate no more than three months after the termination of the
Optionee's termination of employment or consultancy, unless such termination is
as a result of death or disability, in which case options remain exercisable for
up to 12 months thereafter. The Committee also has discretion under the 1995
Plan to accelerate the exercisability of all or part of the unvested portion of
an Optionee's options.
The exercise price of an option is payable in cash. The Committee, in
its discretion, may also permit an employee or consultant to pay the exercise
price by surrendering shares of Common Stock or through a so-called
broker-financed transaction. The 1995 Plan also permits the withholding of
shares issuable upon the exercise of options or the delivery of previously
acquired shares of Common Stock to satisfy withholding taxes.
Options may be evidenced by a written option document containing
provisions consistent with the 1995 Plan and such other provisions as the
Committee deems appropriate.
Each ISO and, unless otherwise determined by the Committee, each NQSO
granted under the Plan is not transferable other than by will or pursuant to the
laws of descent and distribution.
5. Options Granted to Non-Employee Directors. The 1995 Plan
provides for the grant of NQSOs to non-employee directors. Non-employee
directors may receive two types of NQSO grants under the 1995 Plan. A
non-employee director will receive an initial grant of an NQSO to purchase
10,000 shares of Common Stock on the date he or she first becomes a non-employee
director. In addition, on the day of the Company's regular annual meeting of its
shareholders, each non-employee director will receive an additional annual grant
of an NQSO to purchase 10,000 shares of the Company's Common Stock.
An initial grant of an NQSO to a non-employee director shall be
exercisable in increments of 33 1/3% of such NQSO on each of the first through
the third anniversaries of the date of grant. An annual grant of an NQSO to a
non-employee director shall be immediately exercisable for 33 1/3% of the total
number of shares covered by the option, and shall become exercisable as to an
additional 2.778% of the option shares on the first day of each of the next
following 24 months. The exercise price of NQSOs granted to non-employee
directors is the fair market value of the shares of Common Stock on the date of
grant. The exercise price may be paid in cash or by surrendering shares of
Common Stock previously acquired by the non-employee director. NQSOs granted to
non-employee directors expire on the earlier of (i) five years from the date of
grant, or (ii) 30 days after the last day the Optionee served as a director (12
months in the event of death).
NQSOs granted to non-employee directors are not transferable or
assignable, other than by will or pursuant to the laws of descent and
distribution.
6. Stock Bonus Awards. The 1995 Plan provides for the award of
shares of Common Stock as stock bonuses. Shares awarded as a bonus shall be
subject to any terms, conditions, and restrictions determined by the Committee,
such as restrictions regarding the transferability and the forfeiture of the
shares awarded. The Committee may require the recipient of a stock bonus award
to sign an agreement as a condition of the award. The agreement may contain any
terms, conditions, restrictions, representations, and warranties required by the
Committee.
7. Restricted Stock. The 1995 Plan also provides for the
issuance of shares of Common Stock subject to restrictions. The Committee may
issue shares of restricted stock for consideration that may be less than the
fair market value of the shares at the time of issuance. Shares of restricted
stock issued under the 1995 Plan shall be subject to any terms, conditions, and
restrictions required by the Committee, and shall be issued pursuant to a
purchase agreement executed by the Company and the prospective recipient of the
shares prior to the delivery of certificates representing such shares.
8. Stock Appreciation Rights ("SARs"). The Committee may also
issue SARs under the 1995 Plan. Each SAR shall entitle the holder, upon
exercise, to receive an amount equal to the excess of the fair market value on
the date of exercise of one share of the Company's Common Stock over its fair
market value on the date of grant (or, in the case of a SAR granted in
connection with an option, the excess of the fair market value of one share of
Common Stock over the option price per share under the option to which the SAR
relates), multiplied by the number of shares covered by the SAR (or the option)
that is surrendered.
A SAR shall be exercisable only at the time or times established by the
Committee. The Committee may withdraw any SAR granted under the 1995 Plan at any
time and may impose conditions upon the exercise of a SAR or adopt rules and
regulations affecting the rights of holders of SARs.
9. Effective Date; Duration. The 1995 Plan, as amended and
restated, became effective on June 18, 1998. If the requisite shareholder
approval is not obtained by June 17, 1999, the 1995 Plan as amended and restated
and all options granted under the 1995 Plan as amended and restated will be null
and void. The 1995 Plan automatically terminates on April 15, 2006, and no
further awards may be made under the 1995 Plan thereafter. The 1995 Plan may be
amended, suspended or terminated at any time by the Board, provided that,
without shareholder approval, no such amendment may (i) change the class of
persons eligible to receive ISOs, (ii) increase the maximum number of shares of
Common Stock authorized for issuance of ISOs, or (iii) extend the duration of
the 1995 Plan with respect to any ISOs granted thereunder. Requisite shareholder
approval is also required for any amendment that would require shareholder
approval under Section 162(m) of the Code, or under the rules of the market on
which the Company's Common Stock is listed.
10. Registration Statement on Form S-8. If the proposal to
approve the 1995 Plan as amended and restated is approved, the Company intends
to file with the Securities and Exchange Commission an amendment to the
Company's Registration Statement on Form S-8 relating to the 1995 Plan as
amended and restated to register the additional shares of Common Stock that may
be issued pursuant to the 1995 Plan.
FEDERAL INCOME TAX TREATMENT OF OPTIONS AND SARS
Based on the advice of counsel, the Company believes that, under
present federal tax laws and regulations, the principal federal income tax
consequences to the Company and to the Eligible Individuals receiving ISOs,
NQSOs and SARs pursuant to the 1995 Plan will be as follows.
Upon the grant or exercise of an ISO, no income will be realized by the
Optionee for federal income tax purposes (although the excess of the fair market
value of the shares over the exercise price will generally be included in the
Optionee's alternative minimum taxable income), and the Company will not be
entitled to any deduction. If the shares received on the exercise of an ISO are
not disposed of within one year following the date of the transfer of such
shares to the Optionee, or within two years following the date of grant of the
option, any profit realized by the Optionee upon the disposition of such shares
will generally be taxed as long-term capital gain. In such event, no deduction
will be allowed to the Company.
Upon the grant of an NQSO, no income will be realized by the Optionee
for federal income tax purposes. Upon the exercise of an NQSO, the amount by
which the fair market value of the shares at the time of exercise exceeds the
exercise price will be taxed as ordinary income to the Optionee, and the Company
will be entitled to a corresponding deduction.
Upon the grant of a SAR, no income will be realized by the recipient
for federal income tax purposes, and the Company will not be entitled to a
deduction. Upon the exercise of a SAR granted in connection with an option, the
Optionee recognizes ordinary income as of the date of exercise in an amount
equal to the excess of the fair market value of the Common Stock on the date of
exercise over the exercise price of the option to which such SAR relates. Upon
the exercise of a SAR not granted in connection with an option, the Optionee
recognizes ordinary income as of the date of exercise in an amount equal to the
excess of the fair market value of one share of Common Stock on the date of
exercise over its fair market value on the date of grant, multiplied by the
number of shares covered by the SAR that are exercised.
Section 162(m) of the Code limits the extent to which the remuneration
paid to the Chief Executive Officer and the four highest compensated executives
(other than the Chief Executive Officer) (collectively, the "Covered Employees")
is deductible by a corporation when the annual remuneration for any of these
officers exceeds $1,000,000 in a calendar year. Remuneration for purposes of
Section 162(m) includes cash compensation and noncash benefits paid for services
(including, with respect to NQSOs, the difference between the exercise price and
the market value of the stock at the time of exercise), subject to certain
exclusions. A limitation on the maximum number of shares of Company Common Stock
with respect to which options may be granted to an Eligible Individual who is an
employee of the Company or a Related Corporation has been added to the 1995 Plan
so that (i) the spread upon exercise of NQSOs would not be treated as
remuneration for purposes of Section 162(m), and (ii) if any remuneration paid
to any of the Covered Employees exceeds $1,000,000 in the future, any
compensation recognized upon the exercise of NQSOs granted under the 1995 Plan
would be deductible by the Company. This limitation on the maximum number of
shares of Common Stock with respect to which options may be granted to an
employee is 250,000 shares of Common Stock. However, the exemption from the
deduction limit of Section 162(m) of the Code will be available only with
respect to options granted while the Plan (i) is administered by a Committee
consisting of at least two directors, all of whom are "outside directors" within
the meaning of Treasury Regulation ss.1.162-27(e)(3) or any successor thereto,
and (ii) satisfies the stockholder approval requirements of Treasury Regulation
ss.1.162-27(e) or any successor thereto.
Various additional tax consequences apply to the granting and
exercise of SARS and options and to the disposition of shares acquired
thereunder, but such consequences are beyond the scope of this summary. The
foregoing does not purport to be a complete summary of the effect of federal
income taxation upon holders of options or SARs or upon the Company. It also
does not reflect provision of the income tax laws of any municipality, state, or
foreign country in which an Optionee may reside.
VOTE REQUIRED FOR APPROVAL
Approval of the 1995 Plan as amended and restated requires the approval
of the holders of a majority of the shares of the Company's Common Stock
present, in person or by proxy, at the Meeting and entitled to vote.
The Board recommends you to vote FOR this proposal.
PROPOSAL NO. 3:
---------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 3 ON THE PROXY CARD)
The Board of Directors has appointed Ernst & Young LLP as independent auditors
to audit the financial statements of the Company for the fiscal year ending June
30, 1999, subject to ratification by the Company's Stockholders at the Annual
Meeting. If the Stockholders reject the appointment, the Board will reconsider
its selection. If the Stockholders ratify the appointment, the Board, in its
sole discretion, may still direct the appointment of new independent auditors at
any time during the year if the Board believes that such a change would be in
the best interests of the Company.
The Board recommends that you vote FOR this proposal.
FISCAL YEAR 1998 ANNUAL REPORT AND FORM 10-KSB
A copy of the Fiscal Year 1998 Annual Report accompanies this Proxy Statement.
The Company's Annual Report on Form 10-KSB for the year ended June 30, 1998, as
filed with the Securities and Exchange Commission, contains detailed information
concerning the Company and its operations. The Company will provide to any
stockholder a copy of the Form 10-KSB, without charge, upon written request to
Total Research Corporation, 5 Independence Way, Princeton, New Jersey, 08543,
ATTN: Investor Relations.
ADDITIONAL INFORMATION
OTHER BUSINESS
We do not expect any business to come up for stockholder vote at the meeting
other than the items raised in this booklet. If other business is properly
raised, your proxy card authorizes the people named as proxies to vote as they
think best.
PEOPLE WITH DISABILITIES
We can provide reasonable assistance to help you participate in the meeting if
you tell us about your disability and your plan to attend. Please call or write
the Secretary at least two weeks before the meeting at the number or address
under "Questions?" below.
OUTSTANDING SHARES
On November 11, 1998, 11,402,235 shares of Common Stock were outstanding. Each
share has one vote.
HOW WE SOLICIT PROXIES
In addition to mailing, Total Research employees may solicit proxies personally,
electronically, or by telephone. Total Research pays the costs of soliciting
this proxy.
STOCKHOLDER PROPOSALS FOR NEXT YEAR
The deadline for stockholder proposals to be included in our proxy statement for
next year's annual meeting is July 16, 1999. As to stockholder proposals
intended to be presented without inclusion in our proxy statement for our next
annual meeting, the people named next year as proxies will be entitled to vote
as they think best on such proposals unless we have received notice of that
matter on or before September 30, 1999. However, even if such notice is timely
received, the people named next year as proxies may nevertheless be entitled to
vote as they think best on such proposals to the extent permitted by the SEC. On
request, the Secretary will provide detailed instructions for submitting
proposals.
QUESTIONS?
If you have questions or need more information about the annual meeting, write
to:
Corporate Secretary
Total Research Corporation
5 Independence Way
Princeton, New Jersey 08543
Attn: Corporate Secretary
or call us at (609) 520-9100.
OTHER BUSINESS
The Annual Meeting is being held for the purposes set forth in the Notice which
accompanies this Proxy Statement. The Board is not presently aware of business
to be transacted at the Annual Meeting other than set forth in the Notice.
By Order of the Board of Directors,
/s/ David Brodsky
David Brodsky
Chairman of the Board
Princeton, New Jersey
November 11, 1998
TOTAL RESEARCH CORPORATION
1995 STOCK INCENTIVE PLAN
As Amended And Restated Effective June 18, 1998
1. PURPOSE.
-------
The purpose of the TOTAL RESEARCH CORPORATION 1995 STOCK INCENTIVE PLAN (the
"Plan") is to enable Total Research Corporation (the "Company") to attract and
retain the services of selected employees, officers, directors and other key
contributors (including consultants and Non-Employee Directors) of the Company
or any subsidiary of the Company. Moreover, the Company may, through the grant
of non-qualified stock options to non-employee directors ("Non-Employee
Directors") under a formula, attract and retain Non-Employee Directors and
motivate such Non-Employee Directors to exercise their best efforts on behalf of
the Company and any Related Corporation.
2. DEFINITIONS.
-----------
2.1 BOARD. The term "Board" shall mean the Board of Directors
of the Company.
2.2 CODE. The term "Code" shall mean the Internal Revenue Code
of 1986, as amended.
2.3 COMMITTEE. The term "Committee" shall mean the Company's
Compensation Committee which shall consist of not less than two (2)
directors of the Company and who shall be appointed by, and shall serve
at the pleasure of, the Board. Each member of such Committee, while
serving as such, shall be deemed to be acting in his or her capacity as
a director of the Company. On and after the date the Company first
registers equity securities under Section 12 of the Exchange Act, the
Committee shall be subject to the following additional rules:
(a) Each member of the Committee shall be an
"outside director" within the meaning of Treas. Reg. ss.
1.162-27(e)(3) or any successor thereto.
(b) Each member of the Committee shall be a
Non-Employee Director.
Notwithstanding the foregoing, if the Committee does not consist solely
of outside directors and two (2) or more Non-Employee Directors, each
Option granted must be approved by the full Board.
2.4 COMPANY. The term "Company" shall mean TOTAL RESEARCH
CORPORATION.
2.5 EXCHANGE ACT. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
2.6 FAIR MARKET VALUE. The term "Fair Market Value" shall mean
the fair market value of the optioned shares of Common Stock and shall
be arrived at by a good faith determination of the Committee and shall
be:
(a) The mean between the highest and lowest quoted
selling price, if there is a market for the Common Stock on a
registered securities exchange or in an over the counter
market, on the date of grant;
(b) The weighted average of the means between the
highest and lowest sales on the nearest date before and the
nearest date after the date of grant, if there are no
<PAGE>
sales on the date of grant but there are sales on dates
within a reasonable period both before and after the date of
grant;
(c) The mean between the bid and asked prices, as
reported by the National Quotation Bureau on the date of
grant, if actual sales are not available during a reasonable
period beginning before and ending after the date of grant;
(d) The closing selling price for the Common Stock on
a recognized securities exchange or over-the-counter exchange
as of the date of grant; or
(e) Such other method of determining fair market
value as shall be authorized by the Code, or the rules or
regulations thereunder, and adopted by the Committee. Where
the fair market value of the optioned shares of Common Stock
is determined under (b) above, the average of the means
between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant is to be
weighted inversely by the respective numbers of trading days
between the selling dates and the date of grant (i.e., the
valuation date), in accordance with Treas. Reg. ss.
20.2031-2(b)(1).
2.7 INCENTIVE STOCK OPTION. The term "Incentive Stock Option"
("ISO") shall mean an Option which, at the time such Option is granted
under the Plan, qualifies as an ISO within the meaning of section 422
of the Code and is designated as an ISO in the Option Agreement.
2.8 KEY EMPLOYEE. The term "Key Employee" shall mean officers
and other key employees of the Company.
2.9 NON-EMPLOYEE DIRECTOR. The term "Non-Employee Director"
shall mean a director who:
(a) Is not currently an officer (as defined in 17 CFR
240.16a-1(f)) of, or otherwise currently employed by, the
Company or a parent or subsidiary of the Company within the
meaning of 17 CFR 240.16b-3(b)(3),
(b) Does not receive compensation, either directly or
indirectly, from the Company or a parent or subsidiary of the
Company within the meaning of 17 CFR 240.16b-3(b)(3) for
services rendered as a consultant or in any other capacity
other than as a director, except for an amount that does not
exceed the dollar amount for which disclosure would be
required under 17 CFR 229.404(a),
(c) Does not possess an interest in any other
transaction for which disclosure would be required pursuant to
17 CFR 229.404(a), and
(d) Is not engaged in a business relationship for
which disclosure would be required pursuant to 17 CFR
229.404(b).
2.10 NON-QUALIFIED STOCK OPTION. The term "Non-Qualified Stock
Option" ("NQSO") shall mean an Option which, at the time such Option is
granted, does not qualify as an ISO, and/or is designated as an NQSO in
the Option Agreement.
2.11 OPTIONEE. The term "Optionee" shall mean an individual to
whom an Option has been granted.
2.12 OPTIONS. The term "Options" shall mean Incentive Stock
Options and Non-Qualified Stock Options.
- 2 -
<PAGE>
2.13 OPTION AGREEMENT. The term "Option Agreement" shall mean
a written document evidencing the grant of an Option, as described in
paragraph 7.
2.14 PLAN. The term "Plan" shall mean the TOTAL RESEARCH
CORPORATION 1995 STOCK INCENTIVE PLAN, as set forth herein and as
amended from time to time.
2.15 RELATED CORPORATION. The term "Related Corporation" shall
mean either a corporate subsidiary of the Company, as defined in
section 424(f) of the Internal Revenue Code of 1986, as amended
("Code"), or the corporate parent of the Company, as defined in section
424(e) of the Code.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
Subject to adjustment, as provided below, the shares to be offered under the
Plan shall consist of Common Stock of the Company, and the total number shares
of Common Stock that may be issued under the Plan shall not exceed 2,000,000
shares. The shares issued under the Plan may be authorized and unissued shares
or reacquired shares. If an Option or stock appreciation right granted under the
Plan expires, terminates or is canceled, the unissued shares subject to such
Option or stock appreciation right shall again be available under the Plan. If
shares sold or awarded as a bonus under the Plan are forfeited to the Company or
repurchased by the Company, the number of shares forfeited or repurchased shall
again be available under the Plan.
4. EFFECTIVE DATE AND DURATION OF PLAN.
-----------------------------------
4.1 EFFECTIVE DATE. The Plan became effective as of April 16, 1996. The
Plan as Amended and Restated herein became effective June 18, 1998.
4.2 DURATION. The Plan shall continue in effect until all shares available
for issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time except with respect to Options and shares subject to restrictions then
outstanding under the Plan. Termination shall not affect any outstanding Option,
any right of the Company to repurchase shares or the forfeitability of shares
issued under the Plan.
5. ADMINISTRATION.
--------------
The Plan shall be administered by a Committee as defined in subparagraph 2.3
(except that only the Board of Directors may amend or terminate the Plan as
provided in paragraphs 4 and 17), or by the Board of Directors of the Company.
The Committee shall have full authority, subject to the terms of the Plan, to
select the employees to be granted ISOs and/or NQSOs under the Plan, to grant
Options on behalf of the Company, to set the date of grant and the other terms
of such Options, and to make such other awards as permitted under the Plan. The
Committee may correct any defect, supply any omission and reconcile any
inconsistency in this Plan and in any Option granted hereunder in the manner and
to the extent it shall deem desirable. The Committee also shall have the
authority to establish such rules and regulations, not inconsistent with the
provisions of the Plan, for the proper administration of the Plan, and to amend,
modify or rescind any such rules and regulations, and to make such
determinations and interpretations under, or in connection with, the Plan, as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
shareholders and all employees, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons claiming under
or through any of them.
If the Plan is administered by the Board of Directors, all references to the
Committee in the Plan shall mean and relate to the Board of Directors.
Notwithstanding the foregoing, the terms and conditions of grants of NQSOs to
Non-Employee Directors are intended to be fixed in advance. Consequently, the
grants of NQSOs to Non-Employee Directors shall
- 3 -
<PAGE>
be as set forth in paragraph 11 and neither the Committee nor the Board shall
have any discretionary authority with respect thereto.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option or award
granted under it.
6. TYPES OF AWARDS.
---------------
The Committee may, from time to time, take the following actions, separately or
in combination, under the Plan: (i) grant Incentive Stock Options as provided in
subparagraphs 7.1 and 7.2; (ii) grant Non-Qualified Stock Options as provided in
subparagraphs 7.1 and 7.3; (iii) award stock bonuses as provided in paragraph 8;
(iv) sell shares subject to restrictions as provided in paragraph 9; and (v)
grant stock appreciation rights as provided in paragraph 10. Any such awards may
be made to employees, including employees who are officers or directors,
directors, and to non-employees (including consultants) who the Committee
believes have made or will make an important contribution to the Company or its
subsidiaries. The Committee shall select the individuals to whom awards shall be
made and shall specify the action taken with respect to each individual to whom
an award is made. At the discretion of the Committee, an individual may be given
an election to surrender an award in exchange for the grant of a new award.
7. OPTION GRANTS.
-------------
7.1 GENERAL RULES RELATING TO OPTIONS.
---------------------------------
(a) TERMS OF GRANT.
--------------
(i) The Committee may grant Options under the Plan. With respect to
each Option grant, the Committee shall determine the number of shares
subject to the Option, the Option price (which price shall be no less
than the Fair Market Value of the shares of Common Stock subject to
such Option on the date of grant), the period of the Option, the time
or times at which the Option may be exercised and whether the Option is
an ISO or an NQSO.
(ii) Options may be granted under the Plan to purchase up to a maximum
of 250,000 shares of the Company's Common Stock, subject to adjustment
as hereinafter provided. Shares issuable under the Plan may be
authorized but unissued shares or reacquired shares, and the Company
may purchase shares required for this purpose, from time to time, if it
deems such purchase to be advisable.
(iii) If any Option granted under the Plan expires or otherwise
terminates for any reason whatever (including, without limitation, the
Optionee's surrender thereof) without having been exercised, the shares
subject to the unexercised portion of such Option shall continue to be
available for the granting of Options under the Plan as fully as if
such shares had never been subject to an Option; provided, however,
that (aa) if an Option is cancelled, the cancelled Option is counted
against the maximum number of shares for which Options may be granted
to a Key Employee, and (bb) if the Option price is reduced after the
date of grant, the transaction is treated as a cancellation of an
Option and the grant of a new Option for purposes of counting the
maximum number of shares for which Options may be granted to a Key
Employee.
(b) EXERCISE OF OPTIONS.
-------------------
(i) Except as provided in subparagraph 7.1(d) or as determined by the
Committee, no Option granted under the Plan may be exercised unless at
the time of such exercise the Optionee is employed by or in the service
of the Company or any subsidiary of the Company (except for
consultants) and shall have been so employed or provided such service
continuously since the date such Option was granted. Absence on leave
or on account of illness or disability under rules established by the
Committee shall not, however, be deemed an interruption of employment
or service for this purpose. Except as provided in paragraphs 7.1(d)
and 12, Options granted under
- 4 -
<PAGE>
the Plan may be exercised from time to time over the period stated in
each Option in such amounts and at such times as shall be prescribed by
the Committee, provided that Options shall not be exercised for
fractional shares. Unless otherwise determined by the Committee,
if the Optionee does not exercise an Option in any one year with
respect to the full number of shares to which the Optionee is entitled
in that year, the Optionee's rights shall be cumulative and the
Optionee may purchase those shares in any subsequent year during the
term of the Option.
(ii) Options shall be exercisable in such installments and on such
dates, not less than 6 months from the date of grant, as the Committee
may specify, provided that:
(1) In the case of new Options granted to a Key Employee in
replacement for options (whether granted under the Plan or
otherwise) held by the Key Employee, the new Options may be
made exercisable, if so determined by the Committee, in its
discretion, at the earliest date the replaced options were
exercisable, but not earlier than 6 months from the date of
grant of the new Options; and
(2) The Committee may accelerate the exercise date of any
outstanding Options (including, without limitation, the 6
month exercise date referred to in (1) above), in its
discretion, if it deems such acceleration to be desirable.
(c) NONTRANSFERABILITY. Each ISO and, unless otherwise determined by the
Committee, each other Option granted under the Plan by its terms shall be
nonassignable and nontransferable by the Optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the Optionee's domicile at the time of death, and each
Option by its terms shall be exercisable during the Optionee's lifetime only by
the Optionee.
(d) TERMINATION OF EMPLOYMENT OR SERVICE.
------------------------------------
(i) GENERAL RULE. Unless otherwise determined by the Committee, in the
event the employment or service of the Optionee with the Company or
Related Corporation terminates for any reason other than because of
physical disability or death as provided in subparagraphs 7.1(d)(ii)
and (iii), the Option may be exercised at any time prior to the
expiration date of the Option or the expiration of 3 months after the
date of such termination, whichever is the shorter period, but only if
and to the extent the Optionee was entitled to exercise the Option at
the date of such termination.
(ii) TERMINATION BECAUSE OF PHYSICAL DISABILITY. Unless otherwise
determined by the Committee, in the event of the termination of
employment or service because of physical disability (as that term is
defined in Section 22(e)(3) of the Code), the Option may be exercised
at any time prior to the expiration date of the Option or the
expiration of 12 months after the date of such termination, whichever
is the shorter period, but only if and to the extent the Optionee was
entitled to exercise the Option at the date of such termination.
(iii) TERMINATION BECAUSE OF DEATH. Unless otherwise determined by the
Committee, in the event of the death of an Optionee while employed by
or providing service to the Company or a Related Corporation, the
Option may be exercised at any time prior to the expiration date of the
Option or the expiration date of 12 months after the date of such
death, whichever is the shorter period, but only if and to the extent
the Optionee was entitled to exercise the Option at the date of such
termination and only by the person or persons to whom such Optionee's
rights under the Option shall pass by the Optionee's will or by the
laws of descent and distribution of the state or country of domicile at
the time of death.
(iv) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO TERMINATION. The
Committee, at the time of grant or at any time thereafter, may extend
the 3-month and 12-month exercise periods by any length of time not
later than the original expiration date of the Option, and may increase
the
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<PAGE>
portion of an Option that is exercisable, subject to such terms and
conditions as the Committee may determine.
(v) FAILURE TO EXERCISE OPTIONS. To the extent that the Option of any
deceased Optionee or of any Optionee whose employment or service
terminates is not exercised within the applicable period, all further
rights to purchase shares pursuant to such Option shall cease and
terminate.
(e) PURCHASE OF SHARES.
------------------
(i) Unless the Committee determines otherwise, shares may be acquired
pursuant to an Option granted under the Plan only upon receipt by the
Company of notice in writing from the Optionee of the Optionee's
intention to exercise, specifying the number of shares as to which the
Optionee desires to exercise the Option and the date on which the
Optionee desires to complete the transaction, and, if required in order
to comply with the Securities Act of 1933, as amended, containing a
representation that it is the Optionee's present intention to acquire
the shares for investment and not with a view to distribution, and any
other information the Committee may request.
(ii) Unless the Committee determines otherwise, on or before the date
specified for completion of the purchase of shares pursuant to an
Option, the Optionee must have paid the Company the full purchase price
of such shares in cash (including, with the consent of the Committee,
cash that may be the proceeds of a loan from the Company) or, with the
consent of the Committee in whole or in part, in Common Stock of the
Company valued at Fair Market Value. The Fair Market Value of Common
Stock provided in payment of the purchase price shall be determined by
the Committee pursuant to subparagraph 2.6. No shares shall be issued
until full payment therefor has been made.
(iii) Each Optionee who has exercised an Option shall immediately, upon
notification of the amount due, if any, pay to the Company , in the
manner provided in the Option Agreement or in (f) below, the amounts
necessary to satisfy any applicable federal, state and local tax
withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the
certificates, the Optionee shall pay such amount to the Company on
demand. If the Optionee fails to pay the amount demanded, the Company
may withhold that amount from other amounts payable by the Company to
the Optionee, including salary, subject to applicable law.
(iv) Upon the exercise of an Option, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued
upon exercise of the Option, less the number of shares surrendered in
payment of the Option exercise.
(f) MANNER OF PAYMENT. The Option price shall be payable:
-----------------
(i) In cash or its equivalent;
(ii) If the Committee, in its discretion, so provides in the Option
Agreement (as hereinafter defined) or, in the case of Options which are
not ISOs, if the Committee, in its discretion, so determines at or
prior to the time of exercise, in whole or in part, in Company Common
Stock previously acquired by the Optionee, provided that if such shares
of Common Stock were acquired through the exercise of an ISO and are
used to pay the Option price of an ISO, such shares have been held by
the Optionee for a period of not less than the holding period described
in section 422(a)(1) of the Code on the date of exercise, or if such
shares of Common Stock were acquired through exercise of an NQSO or of
an Option under a similar plan or through exercise of an ISO and are
used to pay the Option price of an NQSO, such shares have been held by
the Optionee for a period of more than six months on the date of
exercise;
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<PAGE>
(iii) If the Committee, in its discretion, so provides in the Option
Agreement or, in the case of Options which are not ISOs, if the
Committee, in its discretion, so determines at or prior to the time of
exercise, in whole or in part, in Company Common Stock newly acquired
by the Optionee upon exercise of such Option (which shall constitute a
disqualifying disposition in the case of an Option which is an ISO);
(iv) If the Committee, in its discretion, so provides in the Option
Agreement or, in the case of Options which are not ISOs, if the
Committee, in its discretion, so determines at or prior to the time of
exercise, in any combination of (i), (ii) and (iii) above;
(v) If the Committee, in its discretion, so provides in the Option
Agreement or, in the case of Options which are not ISOs, if the
Committee, in its discretion, so determines at or prior to the time of
exercise, by permitting the Optionee to deliver a properly executed
notice of exercise of the Option to the Company and a broker, with
irrevocable instructions to the broker promptly to deliver to the
Company the amount of sale or loan proceeds necessary to pay the
exercise price of the Option.
In the event such Option price is paid, in whole or in part, with
shares of Common Stock, the portion of the Option price so paid shall
be equal to the Fair Market Value on the date of exercise of the
Option, of the Common Stock surrendered in payment of such Option
price.
Any applicable federal, state and local withholding taxes may be paid by the
Optionee, if the Committee, in its discretion, so provides in the Option
Agreement or so determines at or prior to the time of exercise, in whole or in
part, in Company Common Stock previously acquired by the Optionee.
7.2 ISOS. ISOs shall be subject to the following additional terms and
conditions:
(a) LIMITATION ON AMOUNT OF GRANTS. The aggregate Fair Market Value
(determined as of the date the ISO is granted) of the Common Stock with respect
to which ISOs are exercisable for the first time by a Key Employee during any
calendar year (under this Plan and any other ISO plan of the Company or a
Related Corporation) shall not exceed one hundred thousand dollars ($100,000).
Should it be determined that any ISO granted under the Plan inadvertently
exceeds such maximum, such ISO grant shall be deemed to be a grant of an NQSO to
the extent, but only to the extent, of such excess.
(b) LIMITATION ON GRANTS TO 10 PERCENT SHAREHOLDERS. An ISO may be granted
under the Plan to an employee possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of any parent or
subsidiary of the Company only if the Option price is at least 110 percent of
the Fair Market Value of the Common Stock subject to the Option on the date it
is granted, as described in paragraph 7.2(d), and the Option by its terms is not
exercisable after the expiration of five years from the date it is granted.
(c) DURATION OF ISOS. Subject to paragraphs 7.1(b) and 7.2(b), ISOs
granted under the Plan shall continue in effect for the period fixed by the
Committee, except that no ISO shall be exercisable after the expiration of five
years from the date it is granted.
(d) ISO PRICE. The Option price per share for an ISO shall not be less
than 100 percent of the Fair Market Value of the Common Stock covered by the ISO
at the date the Option is granted, except as provided in paragraph 7.2(b). In
the case of a more than ten percent (10%) shareholder as discussed in (b)
above), the Fair Market Value of an ISO shall not be less than the greater of
110% of the Fair Market Value of the optioned shares of Common Stock, or the par
value thereof, on the date the ISO is granted.
(e) LIMITATION ON TIME OF GRANT. No ISO shall be granted on or after the
fifth anniversary of the effective date of the Plan.
7.3 NQSOS. NQSOs shall be subject to the following additional terms
and conditions:
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<PAGE>
(a) NQSO PRICE. The Option price for NQSOs shall not be less than the
greater of 100% of the Fair Market Value of the optioned shares of Common Stock,
or the par value thereof, on the date the NQSO is granted.
(b) DURATION OF NQSOS. NQSOs granted under the Plan shall continue in
effect for the period fixed by the Committee, but the term of each NQSO shall be
not more than 10 years from the date of grant.
8. STOCK BONUSES.
-------------
The Committee may award shares under the Plan as stock bonuses. Shares awarded
as a bonus shall be subject to the terms, conditions, and restrictions
determined by the Committee. The restrictions may include restrictions
concerning transferability and forfeiture of the shares awarded, together with
such other restrictions as may be determined by the Committee. The Committee may
require the recipient to sign an agreement as a condition of the award. The
agreement may contain any terms, conditions, restrictions, representations and
warranties required by the Committee. The certificates representing the shares
awarded shall bear any legends required by the Committee. The Company may
require any recipient of a stock bonus to pay to the Company in cash upon demand
amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the recipient fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company to
the recipient, including salary or fees for services, subject to applicable law.
Upon the issuance of a stock bonus, the number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued.
9. RESTRICTED STOCK.
----------------
The Committee may issue shares under the Plan for such consideration as
determined by the Committee, which consideration may be less than the Fair
Market Value of the Common Stock at the time of issuance. Shares issued under
the Plan shall be subject to the terms, conditions and restrictions determined
by the Committee. The restrictions may include restrictions concerning
transferability, repurchase by the Company and forfeiture of the shares issued,
together with such other restrictions as may be determined by the Committee. All
Common Stock issued pursuant to this paragraph 9 shall be subject to a purchase
agreement, which shall be executed by the Company and the prospective recipient
of the shares prior to the delivery of certificates representing such shares to
the recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Committee. The
certificates representing the shares shall bear any legends required by the
Committee. The Company may require any purchaser of restricted stock to pay to
the Company in cash upon demand amounts necessary to satisfy any applicable
federal, state or local tax withholding requirements. If the purchaser fails to
pay the amount demanded, the Company may withhold that amount from other
accounts payable by the Company to the purchaser, including salary, subject to
applicable law. Upon the issuance of restricted stock, the number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
issued.
10. STOCK APPRECIATION RIGHTS.
--------------------------
10.1 GRANT. Stock appreciation rights may be granted under the Plan by the
Committee, subject to such rules, terms and conditions as the Committee
prescribes.
10.2 EXERCISE.
(a) Each stock appreciation right shall entitle the holder, upon exercise,
to receive from the Company in exchange therefor an amount equal in value to the
excess of the Fair Market Value on the date of exercise of one share of Common
Stock of the Company over its Fair Market Value on the date of grant (or, in the
case of a stock appreciation right granted in connection with an Option, the
excess of the Fair Market Value of one share of Common Stock of the Company over
the Option price per share under the Option to which the stock appreciation
right relates), multiplied by the number of shares covered by the stock
appreciation right or the Option, or portion thereof, that is surrendered. No
stock appreciation right shall be exercisable at a time that the amount
determined under this subparagraph is negative. Payment by
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<PAGE>
the Company upon exercise of a stock appreciation right may be made in Common
Stock valued at Fair Market Value, in cash, or partly in Common Stock and partly
in cash, all as determined by the Committee.
(b) A stock appreciation right shall be exercisable only at the time or
times established by the Committee. If a stock appreciation right is granted in
connection with an Option, the following rules shall apply: (1) the stock
appreciation right shall be exercisable only to the extent and on the same
conditions that the related Option could be exercised; (2) upon exercise of the
stock appreciation right, the Option or portion thereof to which the stock
appreciation right relates terminates; and (3) upon exercise of the Option, the
related stock appreciation right of portion thereof terminates.
(c) The Committee may withdraw any stock appreciation right granted under
the Plan at any time and may impose any conditions upon the exercise of a stock
appreciation right or adopt rules and regulations from time to time affecting
the rights of holders of stock appreciation rights. Such rules and regulations
may govern the right to exercise stock appreciation rights granted prior to
adoption or amendment of such rules and regulations as well as stock
appreciation rights granted thereafter.
(d) For purposes of this paragraph 10, the Fair Market Value of the Common
Stock shall be determined in accordance with subparagraph 2.6.
(e) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal to the
value of the fraction or, if the Committee shall determine, the number of shares
may be rounded downward to the next whole share.
(f) Each holder of a stock appreciation right who has exercised a
stock appreciation right shall, upon notification of the amount due, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state and
local tax withholding requirements. If the holder fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable by the
Company to the holder, including salary, subject to applicable law. With the
consent of the Committee, a holder may satisfy this obligation in whole or in
part, by having the Company withhold from any shares to be issued upon the
exercise that number of shares that would satisfy the withholding amount due or
by delivering Common Stock to the Company to satisfy the withholding amount.
(g) Upon the exercise of a stock appreciation right for shares, the number
of shares reserved for issuance under the Plan shall be reduced by the number of
shares issued, less the number of shares surrendered or withheld to satisfy
withholding obligations. Cash payments of stock appreciation rights shall not
reduce the number of shares of Common Stock reserved for issuance under the
Plan.
11. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.
---------------------------------------
11.1 INITIAL NON-DISCRETIONARY GRANTS. Each person who is or becomes
a Non-Employee Director after April 16, 1996 shall be automatically granted an
NQSO to purchase 10,000 shares of Common Stock on the date he or she becomes a
Non-Employee Director, as defined in subparagraph 2.9.
11.2 EXERCISABILITY. All NQSOs granted pursuant to subparagraph 11.1 shall
be exercisable according to the following schedule.
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<PAGE>
PERIOD OF NON-EMPLOYEE DIRECTOR'S
CONTINUOUS SERVICE AS A DIRECTOR
OF THE COMPANY FROM THE DATE THE PORTION OF TOTAL OPTION
OPTION IS GRANTED WHICH IS EXERCISABLE
- --------------------------- --------------------
Less than 12 months: 0%
After each 12 month 33 1/3% plus 33 1/3%
successive period: for each 12 months of
additional continuous
service, until fully
vested
11.3 ANNUAL NON-DISCRETIONARY GRANTS TO CONTINUING NON-EMPLOYEE DIRECTORS.
Each person who is or becomes a Continuing Non-Employee Director after April 16,
1996 shall automatically annually receive, on the day of the Company's regular
annual meeting of its shareholders, a nondiscretionary grant of NQSOs to
purchase up to 10,000 shares of the Company's Common Stock. A "Continuing
Non-Employee Director" is a Non-Employee Director who continuously serves as a
Non-Employee Director of the Company during a period of time which includes the
date(s) upon which one or more annual shareholder meetings of the company are
held.
11.4 EXERCISABILITY. All NQSOs granted pursuant to subparagraph 11.3 above
shall be immediately exercisable for 33 1/3% of the total number of shares
covered by the Option (the "Option Shares"), and shall become exercisable as to
an additional 2.778% of the Option Shares on the first day of each of the next
following 24 months, until fully vested.
11.5 EXERCISE PRICE. The exercise price of any NQSO granted pursuant to
this paragraph 11 shall be equal to the Fair Market Value of the Common Stock as
determined in accordance with the procedure set forth in paragraph 7.3(a).
11.6 TERM OF OPTION. The terms of each NQSO granted pursuant to this
paragraph 11 shall be five years from the date of grant.
11.7 "COMPLETE MONTH". For all purposes of this paragraph 11, a complete
month shall be deemed to be the period which starts on the day of grant and ends
on the same day of the following calendar month, so that each successive
"complete month" ends on the same day of each successive calendar month (or, in
respect of any calendar month which does not include such a day, that "complete
month" shall end on the first day of the next following calendar month).
11.8 TERMINATION AS A DIRECTOR. If an Optionee ceases to be a director of
the Company for any reason, including death, all NQSOs granted pursuant to this
paragraph 11 may be exercised at any time prior to the expiration date of the
NQSO or the expiration of 30 days (or 12 months in the event of death) after the
last day the Optionee served as a director, whichever is the shorter period, but
only if and to the extent the Optionee was entitled to exercise the NQSO as of
the last day the Optionee served as a director.
11.9 NONTRANSFERABILITY. Each NQSO granted pursuant to this paragraph 11
by its terms shall be nonassignable and nontransferable by the Optionee except
by will or by the laws of descent and distribution of the state or country of
the Optionee's domicile at the time of death .
11.10 EXERCISE OF NQSOS. Any NQSO granted pursuant to this paragraph 11 may
be exercised upon payment of cash or, in whole or in part, through the transfer
of shares of Common Stock previously acquired by the Optionee, provided the
Common Stock so transferred has been held by the Optionee for more than 12
months on the date of exercise.
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<PAGE>
12. CHANGES IN CAPITAL STRUCTURE.
----------------------------
If the outstanding Common Stock of the Company is hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
recapitalization, reclassification, stock split, combination of shares or
dividend payable in shares, appropriate adjustment shall be made by the Board of
Directors in the number and kind of shares available for awards under the Plan.
In addition, the Board of Directors shall make appropriate adjustment in the
number and kind of shares as to which outstanding Options and stock appreciation
rights, or portions thereof then unexercised, shall be exercisable, so that the
Optionee's proportionate interest before and after the occurrence of the event
is maintained. The Board of Directors may also require that any securities
issued in respect of or exchanged for shares issued hereunder that are subject
to restrictions be subject to similar restrictions. Notwithstanding the
foregoing, the Board of Directors shall have no obligation to effect any
adjustment that would or might result in the issuance or fractional shares, and
any fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors. Any such
adjustments made by the Board of Directors shall be conclusive.
13. EFFECT OF LIQUIDATION OR REORGANIZATION.
---------------------------------------
13.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK. Except as provided in
paragraph 13.2, upon a merger, consolidation, acquisition of property or stock,
reorganization or liquidation of the Company, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, any Option granted
hereunder shall terminate, but the Optionee shall have the right during a 30-day
period immediately prior to any such merger, consolidation acquisition of
property or stock, reorganization or liquidation to exercise his or her Option
in whole or in part whether or not the vesting requirements applicable to the
Option have been satisfied at the discretion of the Committee.
13.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE. If the stockholders
of the Company receive capital stock of another corporation ("Exchange Stock")
in exchange for their shares of Common Stock in any transaction involving a
merger, consolidation, acquisition of property or stock, separation or
reorganization, all Options granted hereunder shall be converted into Options to
purchase shares of Exchange Stock unless the Committee, in its sole discretion,
determines that any or all such Options granted hereunder shall not be converted
into options to purchase shares of Exchange Stock but instead will terminate in
accordance with the provisions of paragraph 13.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
Options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Stock receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization.
14. CORPORATE MERGERS, ACQUISITIONS, ETC.
-------------------------------------
The Committee may also grant stock appreciation rights, stock bonuses and cash
bonuses and issue restricted stock, and grant Options under the Plan having
terms, conditions and provisions that vary from those specified in this Plan,
provided that any such awards are granted in substitution for, or in connection
with the assumption of, existing Options, stock appreciation rights, stock
bonuses, and restricted stock granted, awarded or issued by another corporation
and assumed or otherwise agreed to be provided for by the Company pursuant to or
by reason of a transaction involving a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
which the Company or a subsidiary is a party.
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<PAGE>
15. AMENDMENT OF PLAN.
-----------------
The Board of Directors may at any time, and from time to time, modify or amend
the Plan in such respect as it shall deem advisable because of changes in the
law while the Plan is in effect or for any other reason. Except as provided in
paragraphs 7.1(d), 12 and 13, however, no change in an award already granted
shall be made without the written consent of the holders of such award. The
following amendments shall require shareholder approval (given in the manner set
forth in paragraph 15(c) below):
(a) With respect to ISOs, any amendment which would:
(i) Change the class of employees eligible to participate in the
Plan;
(ii) Except as permitted under paragraph 15 hereof, increase the
maximum number of shares of Common Stock with respect to which ISOs may
be granted under the Plan; or
(iii) Extend the duration of the Plan under paragraph 17 hereof with
respect to any ISOs granted hereunder; and
(b) With respect to Options which are not ISOs, any amendment which
would require shareholder approval pursuant to Treas. Reg. ss.
1.162-27(e)(4)(vi) or any successor thereto.
Notwithstanding the foregoing, no such suspension, discontinuance or amendment
shall materially impair the rights of any holder of an outstanding Option
without the consent of such holder.
(c) Shareholder approval must meet the following requirements:
(i) The approval of shareholders must be by a majority of the
outstanding shares of Common Stock present, or represented, and
entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Delaware; and
(ii) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state law
prescribing the method and degree of shareholder approval required for
the issuance of corporate stock or options.
16. AMENDMENT OF OPTION AGREEMENT.
-----------------------------
The Board of Directors may at any time modify or amend any Option Agreement
issued under the Plan as it shall deem advisable because of changes in the law
while the Plan is in effect or for any other reason. However, no change to an
Option Agreement shall be made without the written consent of the Optionee.
17. TERMINATION OF PLAN.
-------------------
Unless earlier terminated as provided in the Plan, the Plan and all authority
granted hereunder shall terminate absolutely at 12:00 midnight on April 15,
2006, which date is within ten (10) years after the date the Plan was adopted by
the Board (or the date the Plan was approved by the shareholders of the Company,
whichever is earlier), and no Options hereunder shall be granted thereafter.
Nothing contained in this paragraph 17, however, shall terminate or affect the
continued existence of rights created under Options issued hereunder and
outstanding on April 15, 2006, which by their terms extend beyond such date.
18. APPROVALS.
---------
The obligations of the Company under the Plan are subject to the approval of
state and federal authorities or agencies with jurisdiction in the matter. The
Company shall not be obligated to issue or deliver Common Stock under the Plan
if such issuance or delivery would violate applicable state or federal
securities laws.
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<PAGE>
19. EMPLOYMENT AND SERVICE RIGHTS.
-----------------------------
Nothing in the Plan or any award pursuant to the Plan shall: (a) confer upon any
employee any right to be continued in the employment of the Company or any
Related Corporation or interfere in any way with the right of the Company or any
Related Corporation by whom such employee is employed to terminate such
employee's employment at any time, for any reason, with or without cause, or to
decrease such employee's compensation or benefits, or (b) confer upon any person
engaged by the Company any right to be retained or employed by the company or to
the continuation, extension, renewal, or modification of any compensation,
contract, or arrangement with or by the Company.
20. RIGHTS AS A SHAREHOLDER.
-----------------------
The recipient of any award under the Plan shall have no rights as a shareholder
with respect to any Common Stock until the date of issue to the recipient of a
stock certificate for such shares. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.
21. LISTING AND REGISTRATION OF SHARES.
----------------------------------
Each Option or other award hereunder shall be subject to the requirement that,
if at any time the Committee shall determine, in its discretion, that the
listing, registration or qualification of the shares covered thereby upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Option or other award
or the purchase of shares thereunder, or that action by the Company or by the
Key Employee should be taken in order to obtain an exemption from any such
requirement, no such Option may be exercised or such award made, in whole or in
part, unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Key Employee or his or her legal representative or beneficiary
may also be required to give satisfactory assurance that shares purchased upon
exercise of an Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be legended
accordingly.
Date adopted by Board February 17, 1996
Date Approved by Stockholders April 16, 1996
Date First Amended by the Shareholders May 13, 1997
Date Last Amended by the Board of Directors June 18, 1998
Date Last Amended by the Shareholders ________, 1998
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