PRELIMINARY COPIES
PROXY
JIM HJELM'S PRIVATE COLLECTION, LTD.
225 West 37th Street, 5th Floor
New York, New York 10018
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all previous proxies, hereby
appoints Joseph L. Murphy, Daniel M. Sullivan and Joseph E.
O'Grady, and each of them, proxies with power of substitution to
each, for and in the name of the undersigned to vote all shares of
Common Stock of Jim Hjelm's Private Collection, Ltd. (the
"Company") which the undersigned would be entitled to vote if
present at the Annual Meeting of Shareholders of the Company to be
held on May 28, 1997, at 10:00 A.M. at the offices of Kalin &
Banner located at 757 Third Avenue, New York, New York 10017, and
any adjournments thereof, upon the matters set forth in the Notice
of Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual
Meeting, Proxy Statement and the Company's 1997 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD Authority to
below (except as marked vote for all nominees
to the contrary below) listed below
(INSTRUCTION: To withhold authority to vote for an individual
nominee, strike a line through such nominee's name in the list
below.)
JOSEPH L. MURPHY, DANIEL M. SULLIVAN AND
JOSEPH E. O'GRADY
2. APPROVAL OF THE ADOPTION OF THE 1996 STOCK OPTION PLAN;
FOR _______________ AGAINST _______________
3. APPROVAL TO CHANGE THE COMPANY'S NAME TO "JLM COUTURE,
INC."; and
FOR _______________ AGAINST _______________
4. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
FOR _______________ AGAINST _______________
PLEASE SIGN ON THE NEXT PAGE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
and when properly executed will be voted as directed herein. If no
direction is given, this Proxy will be voted FOR proposals 1, 2, 3
and 4.
DATED: , 1997
(Signature)
(Signature, if held jointly)
Where stock is registered in the
names of two or more persons ALL
should sign. Signature(s) should
correspond exactly with the name(s)
as shown above. Please sign, date
and return promptly in the enclosed
envelope. No postage need be affixed
if mailed in the United States.
Requests for copies of proxy statements, the Company's Annual
Report for its fiscal year ended October 31, 1996 or the Company's
Annual Report for its fiscal year ended October 31, 1996 on Form
10-KSB should be addressed to Shareholder Relations, Jim Hjelm's
Private Collection, Ltd., 225 West 37th Street, New York, New York
10018. This material will be furnished without charge to any
shareholder requesting it.
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PRELIMINARY COPIES
JIM HJELM'S PRIVATE COLLECTION, LTD.
(a Delaware Corporation)
Notice of 1997 Annual Meeting
of Shareholders to be held
at 10:00 A.M. on May 28, 1997
To the Shareholders of
JIM HJELM'S PRIVATE COLLECTION, LTD.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Shareholders (the "Meeting") of JIM HJELM'S PRIVATE COLLECTION,
LTD. (the "Company") will be held on May 28, 1997 at 10:00 A.M. at
the offices of Kalin & Banner located at 757 Third Avenue, New
York, New York 10017, to consider and vote on the following
matters described under the corresponding numbers in the attached
Proxy Statement:
1. Election of three directors;
2. Approval of the adoption of the 1996 Stock Option;
3. Approval to change the Company's name to "JLM Couture,
Inc."; and
4. Such other matters as may be properly come before the
Meeting.
The Board of Directors has fixed April 3, 1997, at the close
of business, as the record date for the determination of
shareholders entitled to vote at the Meeting, and only holders of
shares of Common Stock of the Company of record at the close of
business on that day will be entitled to vote. The stock transfer
books of the Company will not be closed.
A complete list of shareholders entitled to vote at the
Meeting shall be available for examination by any shareholder, for
any purpose germane to the Meeting, during ordinary business hours
from April 29, 1997 until the Meeting at the offices of the
Company. The list will also be available at the Meeting.
Whether or not you expect to be present at the Meeting, please
fill in, date, sign, and return the enclosed Proxy, which is
solicited by management. The Proxy is revocable and will not
affect your vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Joseph E. O'Grady, Secretary
Date: April 8, 1997
Request for additional copies of proxy material and the Company's
Annual Report for its fiscal year ended October 31, 1996 should be
addressed to Shareholder Relations, Jim Hjelm's Private Collection,
Ltd., 225 West 37th Street, New York, New York 10018. This
material will be furnished without charge to any shareholder
requesting it.
PRELIMINARY COPIES
JIM HJELM'S PRIVATE COLLECTION, LTD.
225 West 37th Street
New York, New York 10018
Proxy Statement
The enclosed proxy is solicited by the management of Jim
Hjelm's Private Collection, Ltd. (the "Company") in connection with
the 1997 Annual Meeting of Shareholders (the "Meeting") to be held
on May 28, 1997 at 10:00 A.M. at the offices of Kalin & Banner, 757
Third Avenue, New York, New York 10017 and any adjournment thereof.
The Board of Directors has set April 3, 1997 as the record date for
the determination of shareholders entitled to vote at the Meeting.
A shareholder executing and returning a proxy has the power to
revoke it at any time before it is exercised by filing a later
proxy with, or other communication to, the Secretary of the Company
or by attending the Meeting and voting in person.
The proxy will be voted in accordance with your directions as
to:
(1) The election of the persons listed herein as directors of
the Company;
(2) Approval of the Company's 1996 Stock Option Plan;
(3) Approval to change the Company's name to "JLM Couture,
Inc.";
(4) Such other matters as may properly come before the
Meeting.
In the absence of direction, the proxy will be voted in favor
of management's proposals.
The entire cost of soliciting proxies will be borne by the
Company. The costs of solicitation, which represent an amount
believed to be normally expended for a solicitation relating to an
uncontested election of directors, will include the costs of
supplying necessary additional copies of the solicitation materials
and the Company's Annual Report to Shareholders for its fiscal year
ended October 31, 1996 ("Fiscal 1996")(the "Annual Report") to
beneficial owners of shares held of record by brokers, dealers,
banks, trustees, and their nominees, including the reasonable
expenses of such recordholders for completing the mailing of such
materials and Annual Reports to such beneficial owners.
Only shareholders of record of the Company's 1,736,073 shares
of Common Stock (the "Common Stock") outstanding at the close of
business on April 3, 1997 will be entitled to vote. Each share of
Common Stock is entitled to one vote. Holders of a majority of the
outstanding shares of Common Stock must be represented in person or
by proxy in order to achieve a quorum. The proxy statement, the
attached notice of meeting, the enclosed form of proxy and the
Annual Report are being mailed to shareholders on or about April 8,
1997.
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1. ELECTION OF DIRECTORS
Three directors are to be elected by a majority of the votes
cast at the Meeting, each to hold office until the next Annual
Meeting of Shareholders and until his respective successor is
elected and qualifies. The persons named in the accompanying proxy
have advised management that it is their intention to vote for the
election of the following nominees as directors unless authority is
withheld:
Joseph L. Murphy
Daniel M. Sullivan
Joseph E. O'Grady
Management has no reason to believe that any nominee will be
unable to serve. In the event that any nominee becomes
unavailable, the proxies may be voted for the election of such
person or persons who may be designated by the Board of Directors.
The following table sets forth certain information as to the
persons nominated for election as directors of the Company at the
Meeting, all of whom are presently directors of the Company:
Position with Director
Name Age the Company Since
Joseph L. Murphy 42 Chief Executive April 1986
and Financial Officer,
Director
Daniel M. Sullivan 72 Chairman of the September 1986
Board of Directors
Joseph E. O'Grady 75 Secretary and Director February 1991
Joseph L. Murphy, a founder of the Company, has been a
director of the Company since its inception. During Fiscal 1992,
Mr. Murphy was appointed President. In February 1993, Mr. Murphy
was appointed Chief Executive Officer. Mr. Murphy is the brother
of Mark Murphy, the Company's Vice President - Operations.
Daniel M. Sullivan became a director in September 1986 and was
elected Chairman of the Board in 1989. In 1989, Mr. Sullivan
retired as President and chief executive officer of Frost &
Sullivan, Inc., a publicly-traded publisher of market research
studies, a position he had held for more than five years prior to
his retirement.
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Joseph E. O'Grady was appointed to the Board of Directors in
February 1991. In December 1992, Mr. O'Grady was appointed
Secretary. For more than the past five years, Mr. O'Grady has been
the president of JOG Associates, Inc., a privately-held financial
consulting firm based in Hicksville, New York. JOG Associates,
Inc. arranges business financing and provides financial consulting
services for closely-held companies.
Directors serve until the next annual meeting of stockholders
and until their respective successors are elected and qualify.
During the fiscal year ended October 31, 1996 ("Fiscal 1996"),
the Board of Directors met only informally. It acted seven times
by unanimous written consent.
OTHER EXECUTIVE OFFICERS
Position with Position
Name Age the Company Held Since
Mark Murphy 33 Vice President - January 1993
Operations
Mark Murphy, 33, was appointed Vice President - Operations in
May 1993. Mr. Mark Murphy joined the Company in January 1993.
Prior to his joining the Company, Mr. Mark Murphy was employed as
a manager by Accurate Testing Co., a metals testing company based
in California, a position he had held since 1988. Mr. Mark Murphy
is the brother of Joseph L. Murphy, the Company's President.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Mr. Joseph E. O'Grady, upon his appointment as Secretary, did
not timely file Form 3 to list his ownership of securities. Mr.
Carl Seaman did not timely file Form 3 to report the purchase of
shares aggregating more than 10% of the Company's outstanding
shares of Common Stock. These forms were subsequently filed.
AUDIT AND COMPENSATION COMMITTEE
During Fiscal 1996, the Audit and Compensation Committee (the
"Audit Committee") consisting of Messrs. O'Grady and Sullivan did
not meet or act by unanimous written consent.
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EXECUTIVE COMPENSATION
The following table sets forth information relating to the
cash compensation received during the Company's last three fiscal
years by the Company's executive officers:
SUMMARY COMPENSATION TABLE
Name and Annual Com- Other Long Term Other
Principal Fiscal pensation Annual Com- Compensation Compen-
Position Year Salary ($) pensation ($) Options sation($)
Joseph L. 1996 96,000 - 50,000 14,708
Murphy, 1995 104,000 - 50,000 20,864
President 1994 114,000 - - 3,748
Joseph 1996 49,093 - 10,000 -
O'Grady 1995 41,105 - - -
Secretary 1994 32,840 - - -
Mark Murphy, 1996 55,592 - 10,000 7,861
Vice 1995 52,520 - - 4,758
President- 1994 44,260 - - -
Operations
EMPLOYMENT AGREEMENT
On June 17, 1996, Mr. Joseph L. Murphy entered into an amended
employment agreement (the "Agreement") with the Company. The Agreement
terminates June 16, 2001, unless terminated earlier. The base salary
commences at $150,000 per annum. As additional compensation, Mr. Murphy
receives five percent (5%) of the Company's pre-tax profits payable
quarterly, three percent (3%) of which is paid in cash concurrently with
the Company's filing of its Form 10-QSB Quarterly Report or within 60
days of the close of the preceding fiscal quarter of the Company, and
the remaining two percent (2%) accrues and is paid concurrently with the
Company's filing of its Form 10-KSB Annual Report or within 120 days of
the close of the Company's fiscal year, whichever occurs first. The
Agreement also provides for a yearly $6,000 clothing allowance and a
monthly $500 car allowance.
STOCK OPTION PLANS
On November 17, 1986, the Company adopted an Incentive Stock
Option Plan (the "Plan") pursuant to which options to purchase up
to an aggregate of 100,000 shares of Common Stock could be granted.
Such options are intended to qualify as "incentive stock options"
within the meaning of Section 422A of the Code ("Incentive
Options").
In November 1994, the Board adopted and a majority of the
Company's shareholders approved a 1 for 3 reverse stock split,
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which automatically decreased the authorized shares of Common Stock
under the Plan to 33,333. The Plan was amended in February 1996 to
increase the number of shares for which options could be granted to
100,000. A majority of the Company's stockholders approved the
Plan, as amended, in March 1996. During Fiscal 1996, options to
purchase an aggregate of 100,000 shares of Common Stock were
granted to 10 employees of the Company. These options expire four
and three years from the date of issuance and are exercisable at
prices ranging from $.87 and $2.125 per share.
The Plan is administered by the Board of Directors which has
the authority to determine the persons to whom Incentive Options
may be granted, the number of shares of Common Stock to be covered
by each Incentive Option, the time or times at which the Incentive
Options may be granted or exercised and, for the most part, the
terms and provisions of the Incentive Options. The exercise price
of Incentive Options granted under the Plan may not be less than
the fair market value of the shares of Common Stock on the date of
grant.
During Fiscal 1996, Messrs. Joseph L. Murphy, Daniel M.
Sullivan, and Joseph E. O'Grady each received non-incentive stock
options for 50,000, 10,000 and 10,000 shares of Common Stock,
respectively, exercisable at $.87, $2.38, and $.87 per share,
respectively. In addition, Mr. Mark Murphy received an incentive
stock option for 10,000 shares of Common Stock, exercisable at
$2.125 per share, that being the fair market value on the date the
stock option was granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END (FYE) OPTION VALUES
Value of
Unexercised
Number In-the-Money
Of Unexercised Options
Options At FYE End
Shares At FYE Acquired ($)
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized(1) Unexercisable Unexercisable (1)
Joseph L.
Murphy 100,000 $426,500 0/0 0/0
Mark
Murphy - - 48,333/0 193,299/0
Joseph E.
O'Grady - - 10,000/0 43,800/0
________________
(1) Represents fair market value of Common Stock at October 31,
1996 of $5.25 as reported by NASDAQ, less the exercise price.
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COMPENSATION OF DIRECTORS
Directors not employed by the Company are compensated as
consultants for the time spent on Company matters, including
attendance at directors' and other meetings. During Fiscal 1996,
Mr. Sullivan received $30,000 and Mr. O'Grady received $49,093 as
consultant fees. Mr. O'Grady's renumeration is also reported in
the Summary Compensation Table above. Each director also received
a grant of options during Fiscal 1996. See "Stock Option Plans"
above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of February 14, 1997, the
number of shares of Common Stock held of record or beneficially (i)
by each person who held of record, or was known by the Company to
own beneficially, more than five percent of the outstanding shares
of the Common Stock, (ii) by each director and (iii) by all
officers and directors as a group:
Number of Percent of
Names and Address Shares Owned (1) Outstanding Shares
Joseph L. Murphy 233,633(2) 12.7%
225 West 37th Street
New York, NY 10123
Daniel M. Sullivan 92,599(2) 5.3%
225 West 37th Street
New York, NY 10123
Harvest Capital 78,740 4.53%
Corporation
225 West 37th Street
New York, NY 10123
Joseph E. O'Grady 14,666(2) (3)
Jim Hjelm 88,887 5.12%
225 West 37th Street
New York, NY 10123
Carl Seaman 281,666(4) 16.22%
12 The Poplars
Roslyn, NY 11576
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Number of Percent of
Names and Address Shares Owned (1) Outstanding Shares
All Directors and
officers as a
group (4 persons) 429,638(2)(5) 22.7%
_________________
(1) Unless otherwise indicated, all shares of Common Stock are
owned directly.
(2) Includes 100,000, 10,000, 10,000 and 158,333 shares for
Messrs. J. Murphy, Sullivan, O'Grady and all officers and
directors as a group, respectively, that are issuable upon
exercise of presently exercisable options at an average
exercise price of approximately $2.28 per share.
(3) Less than one percent.
(4) Based on information on Schedule 13D dated June 1, 1995 filed
with the Company on behalf of Mr. Seaman.
(5) Pursuant to the Securities Exchange Act of 1934, in addition
to the ownership of Common Stock set forth above, Mr. Joseph
L. Murphy, by virtue of his position with (President and a
director) and ownership of 22.1% of the outstanding Common
Stock of Harvest Capital Corporation ("Harvest") and Mr.
Sullivan, by virtue of his position with Harvest (Secretary
and a director), are considered to be the beneficial owners of
the shares of Common Stock owned by Harvest.
The Company is unaware of any arrangement, the operation of
which, at a subsequent date, may result in a change of control of
the Company.
CERTAIN TRANSACTIONS
On November 21, 1994, Mr. Carl Seaman lent the Company
$200,000 at an interest rate of six (6%) percent per annum in
excess of Chemical Bank's floating prime rate to be payable in one
year (the "Seaman Loan"). As security for the Seaman Loan, the
Company granted Mr. Seaman a security interest in the Company's
account receivables. The Seaman Loan was repaid during Fiscal
1996.
On February 2, 1996, the Company entered into a loan agreement
with CBC of New York Inc., trading as Continental Business Credit
("CBC"), to obtain a credit line up to $1,500,000 (the "CBC Loan").
The CBC Loan, which bears a minimum interest rate of 12.25% per
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annum (which may be increased due to any fluctuation of the prime
rate announced from time to time by Chemical Bank) is payable
through the direct deposits to CBC Bank of the Company's
receivables. The CBC Loan was increased to $1,700,000 in July
1996. CBC also has a first lien on all of the Company's accounts
receivable. As additional security, Messrs. Joseph L. Murphy and
Joseph E. O'Grady, directors of the Company, personally guaranteed
repayment of the CBC Loan.
2. APPROVAL TO CHANGE COMPANY'S
NAME TO "JLM COUTURE, INC."
THE BOARD OF DIRECTORS IS RECOMMENDING APPROVAL TO CHANGE THE
COMPANY'S NAME TO "JLM COUTURE, INC."
In December 1996, the Board of Directors of the Company
approved a resolution authorizing the Company to change its name to
"JLM Couture, Inc."
The reason the Company desires to amend its name is to reflect
its new image as a manufacturer and marketer of a variety of
fashion designers and their numerous bridal lines. The general
effect of such amendment would be to change the image of the
Company in the marketplace to reflect its broader base of designers
and products.
Section 242 of the Delaware General Corporation Law requires
this amendment to the Company's certificate of incorporation be
approved by a majority of the Company's outstanding shares of stock
entitled to vote at the Meeting.
3. APPROVAL OF THE COMPANY'S
1996 STOCK OPTION PLAN
THE BOARD OF DIRECTORS IS RECOMMENDING APPROVAL OF THE
COMPANY'S 1996 STOCK OPTION PLAN (THE "1996 PLAN"). THE BOARD OF
DIRECTORS ADOPTED THE 1996 PLAN ON AUGUST 26, 1996.
The 1996 Plan provides for the issuance of incentive and non-
statutory stock options to employees, consultants, advisors and/or
directors. The Company will reserve 100,000 shares of its Common
Stock for issuance of shares of Common Stock pursuant to the 1996
Plan. The 1996 Plan will be in effect for ten years from its
effective date. Options shall be exercisable at the fair market
value at the date of the grant except options issued to persons who
own in excess of ten percent of the Common Stock may be no less
than 110% of the fair market value.
Generally, for Federal income tax purposes neither the grant
nor exercise of an incentive option will result in any tax effect
on either the Company or the recipient. Upon the sale of Common
Stock issued upon exercise of such an option, the recipient is
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obligated to pay federal tax on any amount received from the sales
price over the exercise price of the option, as a capital gain.
Generally, this is not a taxable event for the Company. With
respect to non-incentive options, the difference between the
exercise price of the option and the market price of a share of
Common Stock on the day of exercise will be treated as ordinary
income for the recipient and compensation expense for the Company.
A copy of the 1996 Plan is attached hereto as Exhibit "A".
Along with certain prerequisites already incorporated into the body
of the 1996 Plan, Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 requires the 1996 Plan's approval by a
majority of the votes cast at the Meeting.
4. OTHER MATTERS
The Board of Directors has no knowledge of any other matters
which may come before the Meeting and does not intend to present
any other matters. However, if any other matters shall properly
come before the Meeting or any adjournment thereof, the persons
named as proxies will have discretionary authority to vote the
shares of Common Stock represented by the accompanying proxy in
accordance with their best judgment.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP,
independent certified public accountants, auditors of its Fiscal
1996 financial statements, as the auditors of the financial
statements of the Company for its current fiscal year ending
October 31, 1997. A member of such firm is expected to be at the
Meeting and will be given the opportunity to make a statement and
to answer questions any shareholders may have.
SHAREHOLDERS' PROPOSALS
Any shareholder of the Company who wishes to present a
proposal to be considered at the next annual meeting of
shareholders of the Company and who wishes to have such proposal
presented in the Company's Proxy Statement for such meeting must
deliver such proposal in writing to the Company at 225 West 37th
Street, Fifth Floor, New York, New York 10018 on or before April
30, 1998.
By Order of the Board of Directors
Joseph E. O'Grady,
Secretary
Dated: April 8, 1997
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EXHIBIT A
JIM HJELM'S PRIVATE COLLECTION, LTD.
1996 STOCK OPTION PLAN
1. General Plan Information. The purpose of this Stock
Option Plan (the "Plan") is to advance the interests of Jim Hjelm's
Private Collection, Ltd. (the "Company") by enhancing the ability
of the Company to attract and retain selected employees, officers,
consultants, advisors to the Board of Directors and qualified
directors (collectively the "Participants") by creating for such
Participants incentives and rewards for their contributions to the
success of the Company, and by encouraging such Participants to
become owners of shares of the Company's common stock, par value
$0.0002 per share, as the title or par value may be amended (the
"Shares").
Options granted pursuant to the Plan may be incentive stock
options ("Incentive Options") as defined in the Internal Revenue
Code of 1986, as amended (the "Code") or non-qualified options, or
both. The proceeds received from the sale of Shares pursuant to
the Plan shall be used for general corporate purposes.
2. Effective Date of Plan. The Plan will become effective
upon approval by the Board of Directors (the "Board"), and shall be
subject to the approval by the holders of at least a majority of
all Shares present in person and by proxy and entitled to vote
thereon at a meeting of stockholders of the Company prior thereto
or within 12 months thereafter.
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3. Administration of the Plan. The Plan will be administered
by the Board of the Company. The Board will have authority, not
inconsistent with the express provisions of the Plan, to take all
action necessary or appropriate thereunder, to interpret its
provisions, and to decide all questions and resolve all disputes
which may arise in connection therewith. Such determinations of
the Board shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with
respect to the Plan to an employee benefit plan committee or any
other committee (the "Committee"), in which event all references to
the Board hereunder, including without limitation the references in
Section 10, shall be deemed to refer to the Committee. The
Committee shall consist of not fewer than three members. Each of
the members must be a "disinterested person" as that term is
defined in Rule 16b-3 adopted pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act"). A majority of the members of the
Committee shall constitute a quorum, and all determinations of the
Committee shall be made by the majority of its members present at
a meeting. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee by a writing
signed by all of the Committee members.
The Board and the Committee, if any, shall have the authority
to determine eligibility, the number of options granted and the
exercise price of options.
4. Eligibility. The Participants in the Plan shall be all
employees, officers, consultants, advisors to the Board of
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Directors and qualified directors of the Company or any of its
present or future subsidiaries (as defined in Section 9) whether or
not they are also officers of the Company. Members of the
Committee are eligible only if they do not exercise any discretion
in: (i) selecting Participants who receive grants of options; (ii)
determining the number of Shares to be granted to any Participant;
or (iii) determining the exercise price of any options, or as
counsel to the Company may otherwise advise the Committee that the
taking of any such action does not impair the status of such
eligible Committee members as "disinterested persons" within the
meaning of Exchange Act Rule 16b-3.
5. Grant of Options.
(a) The Board shall grant options to Participants that
it, in its sole discretion, selects. Options shall be granted on
such terms as the Board shall determine except that Incentive
Options shall be granted on terms that comply with the Code and
regulations thereunder.
(b) No options shall be granted after August 26, 2006
but options previously granted may extend beyond that date.
6. Option Agreements.
(a) Each option under the Plan shall be evidenced by an
option agreement, which shall be signed by an officer of the
Company and by the optionee and which shall contain such provisions
as may be approved by the Board.
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(b)The option agreements shall constitute binding
contracts between the Company and the optionee. Every optionee,
upon acceptance of such option agreement, shall be bound by the
terms and restrictions of this Plan and of the option agreement.
(c) The terms of the option agreement shall be in
accordance with this Plan, but may include additional provisions
and restrictions, provided that the same are not inconsistent with
the Plan.
7. Terms and Conditions of Options.
(a) Exercise Price. Except as provided in Section 5(b)
of this Plan, the purchase price per share for Shares issuable upon
exercise of options shall be a minimum of 100% of fair market value
on the date of grant and shall be determined by the Board. For
this purpose, "fair market value" will be determined as set forth
in Section 9. Notwithstanding the foregoing, if any person to whom
an option is to be granted owns in excess of ten percent of the
outstanding capital stock of the Company, then no option may be
granted to such person for less than 110% of the fair market value
on the date of grant as determined by the Board.
(b) Annual Limit on Grant and Exercise. Incentive
Options shall not be granted to any individual pursuant to this
Plan, the effect of which would be to permit such person to first
exercise options, in any calendar year, for the purchase of Shares
having a fair market value in excess of $100,000 (determined at the
time of the grant of the options). An optionee hereunder may
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exercise options for the purchase of Shares valued in excess of
$100,000 (determined at the time of the grant of the options) in a
calendar year, but only if the right to exercise such options shall
have first become available in prior calendar years.
(c) Payment for Delivery of Shares. Shares which are
subject to options shall be issued only upon receipt by the Company
of full payment of the purchase price for the Shares as to which
the option is exercised. The purchase price shall be payable by
the Participant to the Company either (i) in cash, certified
check, bank draft or money order payable to the order of the
Company; or (ii) through the delivery of Shares owned by the
Participant for a period of not less than six months and for which
the Participant has good title (free and clear of any liens and
encumbrances) having a fair market value equal to the purchase
price; or (iii) by a combination of cash and Shares as provided in
(i) and (ii) above.
The Company shall not be obligated to deliver any Shares
unless and until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been
complied with, nor, if the outstanding common stock is at the time
not listed on any securities exchange, unless and until the Shares
to be delivered have been listed (or authorized to be added to the
list upon official notice of issuance) upon such exchange, nor
unless or until all other legal matters in connection with the
issuance and delivery of Shares have been approved by the Company's
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counsel. Without limiting the generality of the foregoing, the
Company may require from the person exercising an option such
investment representation or such agreement, if any, as counsel for
the Company may consider necessary in order to comply with the
Securities Act of 1933, as amended and applicable state securities
laws.
A Participant shall have the rights of a shareholder only as
to Shares actually acquired by him under the Plan.
(d) Vesting. Except for options granted pursuant to
Section 5(b) of this Plan, the Board may impose such vesting
restrictions as it sees fit at the time of grant.
(e) Non-Transferability of Options. Options may not be
sold, assigned or otherwise transferred or disposed of in any
manner whatsoever except as provided in Section 7(g).
(f) Forfeiture of Options upon Termination of
Relationship. All options which have not vested shall terminate
and be forfeited automatically upon the termination for any reasons
whatsoever of a Participant's status as an employee, consultant or
advisor to the Board. Unexercised options shall terminate and be
forfeited upon (i) the Participants voluntary termination of his
employment or (ii) the expiration of three months after the
Participant's employment is terminated by the Company. Except as
provided in Section 7(g) below, unexercised options granted to
directors shall not terminate or be forfeited in the event such
person is no longer a director of the Company.
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(g) Death. If a Participant dies at a time when he is
entitled to exercise an option, then at any time or times within
one year after his death (or such further period as the Board may
allow) such options may be exercised, as to all or any of the
Shares which the Participant was entitled to purchase immediately
prior to his death, by his personal representative or the person or
persons to whom the options are transferred by the will or the
applicable laws of descent and distribution, and except as so
exercised such options will expire at the end of such period.
(h) Loans to Exercise Options. If requested by any
Participant to whom a grant of non-qualified options has been made,
the Company or any subsidiary may loan such person the amount of
money necessary to pay the federal income taxes incurred as a
result of the exercise of any options (or guarantee a bank loan for
such purpose), assuming that the Participant is in the maximum
federal income tax bracket six months from the time of exercise and
assuming that the Participant has no deductions which would reduce
the amount of such tax owed. The loan shall be made on or after
April 15th of the year following the year in which the amount of
tax is determined as may be requested by the Participant and shall
be made on such terms as the Company or lending bank determines.
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(i) Withholding Taxes. To the extent that the Company
is required to withhold taxes for federal income tax purposes in
connection with the exercise of any options, the Company shall have
the right to assist the Participant to satisfy such withholding
requirement by (i) the Participant paying the amount of the
required withholding tax to the Company, (ii) the Participant
delivering to the Company Shares of its common stock previously
owned by the Participant or (iii) the Participant having the
Company retain a portion of the Shares covered by the option
exercise. The number of Shares to be delivered to or withheld by
the Company times the fair market value as defined by Section 8 of
this Plan shall equal the cash required to be withheld. To the
extent that the Company elects to allow the Participant either to
deliver or have withheld Shares of the Company's common stock, the
Board or the Committee may require him to make such election only
during certain periods of time as may be necessary to comply with
appropriate exemptive procedures regarding the "short-swing" profit
provisions of Section 16(b) of the Exchange Act or to meet certain
Code requirements.
8. Shares Subject to Plan.
(a) Number of Shares and Stock to be Delivered. Shares
delivered pursuant to this Plan shall, in the discretion of the
Board, be authorized but unissued Shares of common stock or
previously issued Shares acquired by the Company. Subject to
adjustments as described below, the aggregate number of Shares
which may be delivered under this Plan shall not exceed 100,000
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Shares of common stock of the Company.
(b) Changes in Stock. In the event of a stock dividend,
stock split or combination of Shares, recapitalization, merger in
which the Company is the surviving corporation or other change in
the Company's capital stock, the number and kind of Shares of stock
or securities of the Company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum
number of Shares or securities which may be delivered under the
Plan, the option price and other relevant provisions, shall be
appropriately adjusted by the Board whose determination shall be
binding on all persons. In the event of a consolidation or merger
in which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's
outstanding stock by a single person or entity, or in the event of
the sale or transfer of substantially all the Company's assets, all
outstanding options shall thereupon terminate.
The Board may also adjust the number of Shares subject to
outstanding options, the exercise price of outstanding options and
the terms of outstanding options to take into consideration
material changes in accounting practices or principles,
consolidations or mergers (except those in which the Company is not
the surviving Corporation as described in the immediately preceding
paragraph), acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of
the Plan.
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9. Definitions.
(a) For purposes of the Plan, a subsidiary is any
corporation (i) in which the Company owns, directly or indirectly,
stock possessing 50 percent or more of the total combined voting
power of all classes of stock or (ii) over which the Company has
effective operating control.
(b) The fair market value of the Shares of common stock
shall be deemed to be:
(i) the closing price of the Company's common stock
appearing on a national securities exchange if the Company's common
stock is listed on such an exchange, or if not listed, the average
closing bid price appearing on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ");
(ii) if the Shares of common stock are not listed
on NASDAQ, then the average bid price for the Company's stock as
listed in the National Quotation Bureau's pink sheets;
(iii) if there are no listed bid prices published
in the pink sheets, then the market value shall be based upon the
average closing bid price as determined following a polling of all
dealers making a market in the Company's Shares.
10. Indemnification of Board. In addition to and without
affecting such other rights of indemnification as they may have as
members of the Board or otherwise, each member of the Board shall
be indemnified by the Company to the extent legally possible
against reasonable expenses, including attorney's fees, actually
and reasonably incurred in connection with any appeal therein, to
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which he may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any option granted
thereunder, and against all judgments, fines and amounts paid by
him in settlement thereof; provided that such payment of amounts so
indemnified is first approved by a majority of the members of the
Board who are not parties to such action, suit or proceeding, or by
independent legal counsel selected by the Company, in either case
on the basis of a determination that such member acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company; and except that no
indemnification shall be made in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such
Board member is liable for a breach of the duty of loyalty, bad
faith or intentional misconduct in his duties; and provided
further, that the Board member shall, in writing, offer the Company
the opportunity, at its own expense, to handle and defend same.
11. Amendments. The Board may at any time discontinue
granting options under the Plan. The Board may at any time or
times amend the Plan or amend any outstanding option or options for
the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the
extent explicitly required or permitted herein above) no such
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amendment will, without the approval of the stockholders of the
Company, (a) increase the maximum number of Shares available under
the Plan, (b) reduce the option price of outstanding options or
reduce the price at which options may be granted, (c) extend the
time within which options may be granted, (d) amend the provisions
of this Section 11 of the Plan, (e) adversely affect the rights of
any Participant (without his consent) under any options theretofore
granted or (f) be effective if stockholder approval is required by
applicable statute, rule or regulation.
Date Approved by Board of Directors: August 26, 1996
Date to be Approved by Shareholders:
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