<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION' PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IMPACT SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
IMPACT SYSTEMS, INC.
-------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 15, 1995
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Impact Systems, Inc., a California corporation (the "Company"), will be held on
Wednesday, November 15, 1995 at 3:00 p.m., local time, at the principal offices
of the Company located at 1075 East Brokaw Road, San Jose, California 95131,
for the following purposes:
1. To elect directors to serve for the ensuing year and
until their successors are elected.
2. To approve the 1995 Incentive Stock Option Plan.
3. To ratify the appointment of Price Waterhouse LLP as
independent accountants for the Company for the
fiscal year ending March 31, 1996.
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on September 18,
1995 are entitled to notice of and to vote at the meeting and any adjournment
thereof.
All shareholders are cordially invited to attend the meeting in
person. However, to assure your representation at the meeting, you are urged
to complete, date and sign the enclosed Proxy and return it as promptly as
possible in the postage prepaid envelope enclosed for that purpose. If you
should attend the meeting, you may vote in person even though you returned a
Proxy.
FOR THE BOARD OF DIRECTORS
KENNETH P. OSTROW, President
San Jose, California
October 5, 1995
<PAGE> 3
IMPACT SYSTEMS, INC.
-------------------------------------
PROXY STATEMENT FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Impact Systems, Inc., a California corporation (the "Company"), for use at the
Company's 1995 Annual Meeting of Shareholders to be held on Wednesday, November
15, 1995 at 3:00 p.m., local time, or at any adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal offices of the
Company, 1075 East Brokaw Road, San Jose, California 95131. The Company's
telephone number at that address is (408) 453-3700.
These proxy solicitation materials were mailed on or about October 5,
1995 to all shareholders entitled to vote at the meeting.
RECORD DATE
Shareholders of record at the close of business on September 18, 1995
are entitled to notice of and to vote at the meeting. At the record date,
10,285,876 shares of the Company's Common Stock were issued and outstanding.
There were approximately 2,300 shareholders at that date. The last reported
sale price of the Company's Common Stock on the Nasdaq National Market was
$2.875 on September 18, 1995.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company
(Attention: Robert M. Gorski, Vice President, Finance and Operations and Chief
Financial Officer) a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each shareholder voting for the election of directors may cumulate
such shareholder's votes, giving one candidate a number of votes equal to the
number of directors to be elected (three) multiplied by the number of shares
which the shareholder is entitled to vote, or distributing the shareholder's
votes on the same principle among as many candidates as the shareholder
chooses, provided that votes may not be cast for more than three candidates.
However, no shareholder shall be entitled to cumulate votes for any candidate
unless the candidate's name has been placed in nomination prior to the voting
and the shareholder, or any other shareholder, has given notice at the meeting
prior to the voting of the intention to cumulate the shareholder's votes. In
the event that cumulative voting is invoked, the proxy holders will have the
discretionary authority to vote all proxies received by them in such a manner
as to ensure the election of as many of the Board of Directors nominees as
possible. See "Proposal No. 1 -- Election of Directors." On all other
matters, each share has one vote.
The cost of this solicitation will be borne by the Company. The
Company has retained Corporate Investor Communications, Inc. to aid in the
distribution to brokers, banks and other institutional nominees. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners of shares. Solicitation fees and expenses
are not expected to exceed $5,000. Original solicitation of proxies by mail
may be supplemented by telephone, telegram or personal solicitations by
directors, officers or regular employees of the Company. No additional
compensation will be paid for any such services.
<PAGE> 4
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's 1996 Annual Meeting of
Shareholders must be received by the Company not later than June 7, 1996 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
SECURITY OWNERSHIP
The following table sets forth certain information known to the
Company regarding the beneficial ownership of the Company's Common Stock as of
September 18, 1995, by (a) each director of the Company, (b) the Company's
Chief Executive Officer and each of the other executive officers, (c) all
directors and executive officers of the Company as a group, and (d) each
beneficial owner of 5% or more of the outstanding shares of the Company's
Common Stock. Except as otherwise indicated, each person has sole voting and
investment power with respect to all shares shown as beneficially owned,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
- ---------------- ----- -----
<S> <C> <C>
Elsag Bailey Process Automation N.V.(1) 2,378,900 23.1%
Zylstraat 70-74
2011 T. R. Haarlem, The Netherlands
Kenneth P. Ostrow (2) 1,052,619 9.9%
1075 East Brokaw Road
San Jose, CA 95131
C. M. Capital Corporation 531,986 5.2%
525 University Avenue
Palo Alto, CA 94301
Dimensional Fund Advisors, Inc. 526,600 5.1%
1299 Ocean Avenue
Santa Monica, CA 90401
Joseph J. Cusimano (3) 33,461 *
Mike N. Zaharna (4) - -
Robert M. Gorski (5) 128,750 1.2%
John F. Lynch, III (6) 113,750 1.1%
All directors and executive officers as a group (5 persons) 1,328,580 12.2%
(4) (7)
</TABLE>
- -----------------------------
* Represents less than 1% of the outstanding Common Stock.
(1) As reported by Elsag International N.V., Elsag Bailey, Inc., Finmeccanica
S.p.A., and Istituto per la Ricostruzione Industriale (IRI S.p.a.) on
Schedule 13D dated October 15, 1993. All 2,378,900 shares are held of
record by Elsag International N.V. a wholly-owned subsidiary of Elsag
Bailey Process Automation N.V.
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<PAGE> 5
(2) Includes 343,750 shares issuable upon exercise of options exercisable
within 60 days of September 18, 1995.
(3) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of September 18, 1995. Excludes 1,500 shares beneficially owned
by children of Mr. Cusimano, as to which Mr. Cusimano disclaims beneficial
ownership.
(4) Excludes 2,378,900 shares beneficially owned by Elsag Bailey Process
Automation N.V., as to which Mr. Zaharna disclaims beneficial ownership.
As is noted elsewhere in these proxy solicitation materials, Mr. Zaharna
is currently the Group Executive Vice President of Elsag Bailey process
Automation N.V.
(5) Consists of 128,750 shares issuable upon exercise of options exercisable
within 60 days of September 18, 1995.
(6) Includes 88,750 shares issuable upon exercise of options exercisable
within 60 days of September 18, 1995.
(7) Includes 566,250 shares issuable upon exercise of options exercisable
within 60 days of September 18, 1995.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
NOMINEES
A board of three (3) directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the Company's nominees named below, all of whom are presently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of the
nominees listed below as possible, and in such event the specific nominees to
be voted for will be determined by the proxy holders. The term of office of
each person elected as a director will continue until the next Annual Meeting
of Shareholders or until a successor has been elected and qualified.
The nominees, and certain information about them, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------- --- -------------------- -----
<S> <C> <C> <C>
Joseph J. Cusimano 55 President, Honematic Machine 1991
Corporation
Kenneth P. Ostrow 53 President and Chief Executive Officer 1980
of the Company
Mike N. Zaharna 53 Group Executive Vice President, 1992
Elsag Bailey Process Automation N.V.
</TABLE>
There are no family relationships among the directors and executive
officers of the Company.
MR. OSTROW, a founder of the Company, has been an officer and director
of the Company from its inception in 1980. Prior to founding the Company, Mr.
Ostrow was with Measurex in senior sales, service and marketing capacities.
Mr. Ostrow holds a B.A. in Mechanical Engineering from Ohio State University
and a M.B.A. from Northeastern University.
MR. CUSIMANO was elected a director of the Company in November 1991.
Since 1992, Mr. Cusimano has served as President of Honematic Machine
Corporation in Boylston, Massachusetts, a precision machining company. Prior
to that, he served as a Corporate Vice President of Norton Company in
Worcester, Massachusetts in charge of its Superabrasives and Abrasives, Asia
Operations. Mr. Cusimano joined Norton Company in 1966
3
<PAGE> 6
and held several positions within the company prior to his appointment as
Marketing Vice President, Abrasives, Europe, in 1986. In early 1988, Mr.
Cusimano was appointed Divisional Vice President of Seeded-Gel Products, and in
early 1989 he was elected a Corporate Vice President, Chemical Process
Products.
MR. ZAHARNA was elected a director of the Company in July 1992. Mr.
Zaharna was appointed to the Board of Directors as a representative of Elsag
International N.V., the parent company of Elsag Bailey Inc. and a wholly-owned
subsidiary of Elsag Bailey Process Automation N.V. (NYSE:EBY). Mr. Zaharna has
been the Group Executive Vice President of Elsag Bailey Process Automation
N.V., a Netherlands company, since November 1994. Between October 1993 and
November 1994, Mr. Zaharna was Senior Group Vice President, Strategic Marketing
and Technology. Between 1981 and October 1993, Mr. Zaharna held the posts of
Group Vice President/Americas, Pacific & Far East of Elsag Bailey, Inc., Vice
President of International Operations, Executive Vice President of Global
Operations and Chief Operating Officer of Bailey Controls Company, now a
division of Elsag Bailey, Inc. Mr. Zaharna joined Bailey Controls Company in
1966.
Until the occurrence of an "Acceleration Event" (as defined below) the
Company has covenanted to include in the slate of nominees recommended to
shareholders by the Company's Board of Directors or management for election as
directors at each annual meeting of the shareholders of the Company one
designee of Elsag International N.V. (or, if the Board of Directors of the
Company is expanded beyond five members, that number of the designees of Elsag
International N.V. which equals the product of (a) the total number of members
of the Board of Directors multiplied by (b) the percentage of the total voting
power of the Company held by Elsag International N.V., but in no event less
than one (1) designee). In general, an "Acceleration Event" will be the
earlier to occur of December 31, 1995 or the date that it is publicly disclosed
or Elsag International N.V. otherwise learns that any person or group has
acquired or evidences an intent to acquire in excess of 10% of the voting stock
of the Company or, with respect to a person or group already owning 10% of the
voting stock of the Company, such person or group acquires or evidences an
intent to acquire an additional 2% of the voting stock of the Company.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The three nominees receiving the highest number of affirmative votes
of the shares entitled to be voted shall be elected as directors. Votes
withheld will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business at the meeting, but have no other
legal effect upon election of directors under California law.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE NOMINEES SET FORTH HEREIN.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of three meetings
during the fiscal year ended March 31, 1995. During the 1995 fiscal year no
director attended fewer than 75% of the aggregate of all meetings of the Board
of Directors and the committees, if any, on which such director served. The
Board of Directors has an audit committee. The Board of Directors has no
compensation or nominating committee or any other committee performing those
functions.
The Audit Committee of the Board of Directors recommends engagement of
the Company's independent accountants and approves the services performed by
such accountants. In addition, the Audit Committee reviews and evaluates the
Company's accounting principles and its system of internal accounting controls.
The Audit Committee currently consists of Joseph J. Cusimano and Mike N.
Zaharna.
DIRECTOR COMPENSATION
The Company currently does not pay any cash compensation to directors
for service on the Company's Board. Outside directors are, however, eligible
to participate in the Company's Discount Stock Option Plan. For
4
<PAGE> 7
the current year, each non-employee director will receive an option to purchase
10,000 shares, exercisable upon vesting at 10% of the fair market value on the
date of grant. Options granted to non-employee directors vest in full on the
first anniversary of the date of grant and expire if not exercised within five
years from date of grant.
During the fiscal year which ended March 31, 1995, the Company granted
an option to purchase 5,000 shares under its Discount Option Plan exercisable
at $0.1875 per share to Mr. Cusimano. This option was not exercisable by Mr.
Cusimano during the fiscal year.
EXECUTIVE OFFICERS
The executive officers of the Company and their ages as of September
18, 1995 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
Kenneth P. Ostrow 53 President, Chief Executive Officer and Chairman of the
Board
Robert M. Gorski 43 Vice President, Finance and Chief Financial Officer
John F. Lynch, III 54 Vice President, Sales and Service
</TABLE>
See "Nominees" above for background information on Mr. Ostrow.
MR. GORSKI joined the Company in April 1988 as Vice President, Finance
and Administration, Chief Financial Officer, and Assistant Secretary and is
also currently Vice President, Service and Operations. Mr.Gorski holds a B.S.
in Business Administration from the University of Illinois and is a Certified
Public Accountant.
MR. LYNCH joined the Company in December 1982 as Vice President,
Midwestern Sales, and in January 1991 was named Vice President, Sales and
Service. Mr. Lynch holds a B.S. in Chemical Engineering from the University of
Mississippi and a M.B.A. from the Harvard Business School.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company in all capacities for each of the three executive
officers of the Company (collectively, the "Named Officers") for the fiscal
years ended March 31, 1995, 1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
NUMBER OF
NAME AND RESTRICTED SHARES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARD OPTIONS
- ------------------ ---- ------ ----- ---------- -------
<S> <C> <C> <C> <C> <C>
Kenneth P. Ostrow, 1995 $213,400 $85,860 (1) - 15,000
President & Chief 1994 $213,400 - - -
Executive Officer 1993 $213,400 $21,900 $0 (2) -
Robert M. Gorski, 1995 $147,210 $46,598 (1) 15,000
Vice President, 1994 $147,210 - -
Finance and Chief 1993 $147,210 $11,839 20,000
Financial Officer 60,000 (3)
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C>
John F. Lynch III, 1995 $135,381 $30,350 (1) 15,000
Vice President, 1994 $131,013 - -
International 1993 $131,013 $20,000 60,000 (3)
Sales and Service
</TABLE>
___________________________
(1) Earned in fiscal 1995 but paid in fiscal 1996.
(2) In September 1992 the Company granted 72,728 shares of its Common Stock to
Mr. Ostrow at $0.8125 per share, the then existing fair market value. The
restricted stock vests annually at the rate of 18,182 shares per year. On
March 31, 1995, Mr. Ostrow held 72,728 shares of the restricted stock
which had an aggregate value of $86,364.50, net of the purchase price paid
for such shares. With respect to such stock, Mr. Ostrow is entitled to
receive any dividends paid to shareholders generally; however, stock
issued upon stock splits and dividends is subject to the same restrictions
as the restricted stock.
(3) Consists of repriced options to purchase 25,000 shares originally granted
in a prior fiscal year and the regrant of an expiring option to purchase
35,000 shares.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Officers during the fiscal year ended
March 31, 1995. In accordance with the rules of the Securities and Exchange
Commission, also shown below is the potential realizable value over the term of
the option (the period from the grant date to the expiration date) based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are based on certain assumed rates of appreciation and do not represent
the Company's estimate of future stock price. Actual gains, if any, on stock
option exercises will be dependent on the future performance of the Common
Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO POTENTIAL REALIZABLE VALUE
UNDERLYING EMPLOYEES EXERCISE AT ASSUMED ANNUAL RATES
OPTIONS IN FISCAL PRICE PER EXPIRATION OF STOCK PRICE APPRECIATION
NAME GRANTED YEAR SHARE DATE FOR OPTION TERM
- ---- ------- ---- ----- ---- ---------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth P. Ostrow 15,000 (1) 9.87% $0.1875 10-20-04 $43,000 $70,136
Robert M. Gorski 15,000 (2) 9.87% 1.875 10-20-04 17,687 44,824
John F. Lynch III 15,000 (2) 9.87% 1.875 10-20-04 17,687 44,824
</TABLE>
- ---------------------------
(1) Options granted under the Company's Discount Stock Option Plan for
officers and key employees typically have a 10-year term, vest over a
four-year period of employment and have an exercise price equal to 10% of
the market value on the date of grant.
(2) Options granted under the Company's 1985 Incentive Stock Option Plan
typically have a 10-year term, vest over a four-year period of employment
and have an exercise price equal to market value on the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to option exercises
in fiscal 1995 by the Named Officers and the value of such officers
unexercised options at March 31, 1995.
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<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-
ON VALUE UNEXERCISED OPTIONS AT THE-MONEY OPTIONS AT
NAME EXERCISE REALIZED(1) FISCAL YEAR-END FISCAL YEAR-END(2)
- ---- -------- -------- --------------- ---------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth P. Ostrow - - 340,000 15,000 $488,750 $27,188
Robert M. Gorski - - 120,000 25,000 $151,562 $14,062
John F. Lynch III 25,000 $14,375 85,000 15,000 $111,250 $1,875
</TABLE>
- ---------------------------
(1) Market value of underlying securities on the exercise date, minus the
exercise price.
(2) Value is based on the last reported sale price of the Company's Common
Stock on the Nasdaq National Market System of $2.00 per share on March 31,
1995 (the last trading day for fiscal 1995), minus the exercise price.
SEVERANCE AGREEMENTS
The Company has entered into severance agreements (a Senior Plan and a
General Plan) with its officers pursuant to which they may become entitled to
certain special severance benefits in the event their employment is terminated
in connection with certain changes in control of the Company. The Senior Plan
is applicable to Mr. Ostrow and the General Plan is applicable to Mr. Gorski
and Mr. Lynch.
In the case of the Senior Plan:
(i) all outstanding options at the time held by the officer under
the Option Plan will immediately accelerate and become fully exercisable for
all the option shares,
(ii) the Company will make a cash lump sum payment to the officer
in an amount equal to 2.95 times the officer's average W-2 wages from the
Company for the immediately preceding calendar year in which the change in
control occurs, and
(iii) in the event of voluntary termination, an amount equal to 1.5
times the officer's annual compensation.
In the case of the General Plan, the Company will make a lump sum
payment to the officer equal to the minimum of:
(i) six times one-twelfth of the officer's annualized
compensation, or
(ii) one-twelfth of the officer's annualized compensation times the
number of years of continuous employment not to exceed nine.
A change in control is defined under each agreement to include (i) a
business combination which has been approved by the requisite vote of
shareholders, (ii) the acquisition of 30% or more of the Company's outstanding
voting stock, (iii) a change in the composition of the Impact Board as a result
of which fewer than a majority of Directors are Incumbent Directors who either
(a) have been Board members since the beginning of such period or (b) are
elected or nominated for election to the Board with the affirmative votes of at
least a majority of the Incumbent Directors at the time of such election or
nomination.
Involuntary termination is defined in each severance agreement as the
officer's discharge (other than for cause) or other termination of employment,
whether voluntary or involuntary, following a 15% or more reduction in the
officer's compensation or level of responsibilities or a change in the
officer's job location without his or her consent. Termination for cause
includes any involuntary termination triggered by the officer's intentional
misconduct.
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<PAGE> 10
CERTAIN TRANSACTION -- WORKING AGREEMENT
In February 1993, the Company entered into a working agreement with
Elsag Bailey, Inc. ("Bailey"), a wholly-owned subsidiary of Elsag International
N.V. ("Elsag International"), the Company's largest shareholder, which serves
as the framework for cross-OEM agreements with Bailey. Elsag Bailey Process
Automation N.V. which ultimately owns and controls both Elsag International and
Bailey, owns 23.3% of the Company's outstanding common shares at March 31,
1995. The cross-OEM agreement covers both hardware and software. Impact OEMs
the "Unity(TM)" Distributed Control System and related software from Bailey;
Bailey OEM's Impact's complete line of cross-direction actuators and related
software, drying systems, and the "AdvantagePlus(TM)" line of scanners and
sensors, which is specifically designed for Distributed Control Systems (DCS).
During fiscal 1994, the Company recorded revenue of approximately
$750,000 on sales to Bailey and Elsag Bailey (Canada) Inc., both of which are
subsidiaries of Elsag International. Also during fiscal 1994 and fiscal 1995,
the Company purchased $185,000 and $190,000, respectively, in hardware and
software from Bailey Controls Company or Bailey Canada. At March 31, 1994 the
Company had a net outstanding receivable of $361,000 from divisions of Elsag
Bailey, Inc. of the U.S. and Canada.
During fiscal 1993 the Company recorded revenue of $160,000 on sales
to the Elsag Bailey Company of Finmeccanica SpA, a licensee of Elsag
International and an affiliate of Elsag Bailey Process Automation N.V. During
fiscal 1993 the Company also purchased and received components amounting to
$26,500 from Bailey.
Elsag International has covenanted not to acquire beneficial ownership
of any Common Stock, other shares having the ordinary power to vote in the
election of directors of the Company, or shares convertible into Common Stock
or such other shares ("Voting Stock"), except in any case, by way of stock
dividends or other distributions of offerings made available to holders of any
voting stock generally, or to authorize or to make a tender, exchange or other
offer, without the written consent of the Company, if the effect of such
acquisition would be to increase Elsag Bailey's interest in the voting stock of
the Company to greater than twenty-five percent (25%) of the total number of
votes entitled to be cast in the election of the Company's directors. The
above described limitation on the acquisition of voting stock terminates after
an Acceleration Event, as defined in "Nominees" above.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file an initial report
of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Such officers, directors and
10% shareholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that, during the period from
April 1, 1994 to March 31, 1995, all Section 16(a) filing requirements
applicable to its executive officers, directors and ten percent shareholders
were complied with.
PROPOSAL NO. 2
APPROVAL OF 1995 INCENTIVE STOCK OPTION PLAN
In order to replace the 1985 Option Plan which expires in September
1995, the Company's 1995 Stock Option Plan (the "1995 Option Plan") was adopted
by the Board of Directors on August 28, 1995, subject to approval by the
Company's shareholders, and 500,000 shares of Common Stock have been reserved
for issuance thereunder. Options may be granted under the 1995 Option Plan
only after the plan is approved by the Company's shareholders.
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<PAGE> 11
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of the Votes Cast will be required
under California law to approve the adoption of the 1995 Option Plan. For this
purpose, the "Votes Cast" are defined under California law to be the shares of
the Company's Common Stock represented and "voting" at the Annual Meeting. In
addition, the affirmative votes must constitute at least a majority of the
required quorum, which quorum is a majority of the shares outstanding on the
record date. Votes that are cast against the proposal will be counted for
purposes of determining (i) the presence or absence of a quorum and (ii) the
total number of Votes Cast with respect to the proposal. While there is no
definitive statutory or case law authority in California as to the proper
treatment of abstentions in the counting of votes with respect to a proposal
such as the adoption of the Option Plan, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to the proposal. In the absence of controlling precedent to
the contrary, the Company intends to treat abstentions in this manner.
Accordingly, abstentions will have the same effect as a vote against the
proposal. Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but will not
be counted for purposes of determining the number of Votes Cast with respect to
the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE 1995 INCENTIVE STOCK OPTION PLAN.
The essential features of the 1995 Option Plan are outlined below.
GENERAL
The 1995 Option Plan authorizes the Board of Directors (the "Board"),
or one or more committees which the Board may appoint from among its members
(the "Committee"), to grant options and rights to purchase Common Stock.
Options granted under the 1995 Option Plan may be either "incentive stock
options" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or nonstatutory stock options, as determined by the Board
or the Committee.
PURPOSE
The general purpose of the 1995 Option Plan is to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to employees and consultants and to promote the
success of the Company's business.
ADMINISTRATION
The 1995 Option Plan may be administered by the Board or the
Committee. Subject to the other provisions of the 1995 Option Plan, the Board
has the authority to: (i) interpret the plan and apply its provisions; (ii)
prescribe, amend or rescind rules and regulations relating to the plan; (iii)
select the persons to whom options and rights are to be granted; (iv) determine
the number of shares to be made subject to each option and right; (v) determine
whether and to what extent options and rights are to be granted; (vi) prescribe
the terms and conditions of each option and right (including the exercise
price, whether an option will be classified as an incentive stock option or a
nonstatutory option and the provisions of the stock option or stock purchase
agreement to be entered into between the Company and the grantee); (vii) amend
any outstanding option or right subject to applicable restrictions; (viii)
authorize any person to execute, on behalf of the Company, any instrument
required to effect the grant of an option or right; and (ix) take any other
actions deemed necessary or advisable for the administration of the 1995 Option
Plan. All decisions, interpretations and other actions of the Board or the
Committee shall be final and binding on all holders of options or rights and on
all persons deriving their rights therefrom.
9
<PAGE> 12
ELIGIBILITY
The 1995 Option Plan provides that options and rights may be granted
to the Company's employees and consultants. Incentive stock options may be
granted only to employees. Any optionee who owns more than 10% of the combined
voting power of all classes of outstanding stock of the Company (a "10%
Shareholder") is not eligible for the grant of an incentive stock option unless
the exercise price of the option is at least 110% of the fair market value of
the Common Stock on the date of grant.
TERMS AND CONDITIONS OF OPTIONS
Each option granted under the 1995 Option Plan is evidenced by a
written stock option agreement between the optionee and the Company and is
subject to the following terms and conditions:
(a) Exercise Price. The Board or the Committee determines the
exercise price of options to purchase shares of Common Stock at the time the
options are granted. The exercise price under an incentive stock option must
not be less than 100% of the fair market value of the Common Stock on the date
the option is granted, and the exercise price under a nonstatutory option is to
be determined by the Board or the Committee. However, the exercise price of an
incentive stock option granted to a 10% Shareholder may not be less than 110%
of the fair market value on the date of grant. If the Common Stock is listed
on any established stock exchange or a national market system, the fair market
value shall be the closing sale price for such stock (or the closing bid if no
sales were reported) on the date the option is granted. If the Common Stock is
traded on the over-the-counter market, the fair market value shall be the mean
of the high bid and high asked prices on the date the option is granted.
(b) Form of Consideration. The means of payment for shares issued
upon exercise of an option is specified in each option agreement and generally
may be made by cash, check, promissory note, other shares of Common Stock of
the Company owned by the optionee, delivery of an exercise notice together with
irrevocable instructions to a broker to deliver the exercise price to the
Company from sale or loan proceeds, a reduction in the amount of any Company
liability to the optionee, or by a combination thereof.
(c) Exercise of the Option. Each stock option agreement will
specify the term of the option and the date when the option is to become
exercisable. However, in no event shall an option granted under the 1995
Option Plan be exercised more than 10 years after the date of grant. Moreover,
in the case of an incentive stock option granted to a 10% Shareholder, the term
of the option shall be for no more than five years from the date of grant.
(d) Termination of Employment. If an optionee's employment
terminates for any reason (other than death or permanent disability), then all
options held by such optionee under the 1995 Option Plan expire upon the
earlier of (i) such period of time as is set forth in his or her option
agreement (but not to exceed ninety days after the termination of his or her
employment in the event of an incentive stock option) or (ii) the expiration
date of the option. The optionee may exercise all or part of his or her option
at any time before such expiration to the extent that such option was
exercisable at the time of termination of employment.
(e) Permanent Disability. If an employee is unable to continue
employment with the Company as a result of permanent and total disability (as
defined in the Code), then all options held by such optionee under the 1995
Option Plan shall expire upon the earlier of (i) 12 months after the date of
termination of the optionee's employment or (ii) the expiration date of the
option. The optionee may exercise all or part of his or her option at any time
before such expiration to the extent that such option was exercisable at the
time of termination of employment.
(f) Death. If an optionee dies while employed by the Company, his
or her option shall expire upon the earlier of (i) 12 months after the
optionee's death or (ii) the expiration date of the option. The executors or
other legal representative of the optionee may exercise all or part of the
optionee's option at any time before such expiration to the extent that such
option was exercisable at the time of death.
10
<PAGE> 13
(g) Termination of Options. Each stock option agreement will
specify the term of the option and the date when all or any installment of the
option is to become exercisable. Notwithstanding the foregoing, however, the
term of any incentive stock option shall not exceed 10 years from the date of
grant. No options may be exercised by any person after the expiration of its
term.
(h) Nontransferability of Options. During an optionee's lifetime,
his or her option(s) shall be exercisable only by the optionee and shall not be
transferable other than by will or laws of descent and distribution.
(i) Value Limitation. If the aggregate fair market value of all
shares of Common Stock subject to an optionee's incentive stock option which
are exercisable for the first time during any calendar year exceeds $100,000,
the excess options shall be treated as nonstatutory options
(j) Other Provisions. The stock option agreement may contain such
terms, provisions and conditions not inconsistent with the 1995 Option Plan as
may be determined by the Board or Committee
STOCK PURCHASE RIGHTS
The 1995 Option Plan permits the Board or the Committee to grant
rights to purchase Common stock either alone or in tandem with other awards
granted under the 1995 Option Plan and/or cash awards made outside of the 1995
Option Plan. The offer of a right must be accepted within six months of its
grant by the execution of a restricted stock purchase agreement between the
Company and the offeree and the payment of the purchase price of the shares.
Unless the Board or the Committee determines otherwise, the restricted stock
purchase agreement shall grant the Company a repurchase option exercisable upon
termination of the purchaser's employment or consulting relationship with the
Company. The purchase price for any shares repurchased by the Company shall be
the original price paid by the purchaser. The repurchase option shall lapse at
such rate as the Board or Committee may determine.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS
In the event that the stock of the Company is changed by reason of any
stock split, reverse stock split, stock dividend, recapitalization or other
change in the capital structure of the Company, appropriate proportional
adjustments shall be made in the number and class of shares of stock subject to
the 1995 Option Plan, the number and class of shares of stock subject to any
option or right outstanding under the 1995 Option Plan, and the exercise price
of any such outstanding option or right. Any such adjustment shall be made
upon approval of the Board, and if required, the stockholders of the Company,
whose determination shall be conclusive. Notwithstanding the above, in
connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option and right shall be
assumed or an equivalent option or right substituted by a successor
corporation. If the successor corporation does not assume the options or
substitute substantially equivalent options, then the exercisability of all
outstanding options and rights shall be automatically accelerated. In the
event of a merger or a sale of all or substantially all of the Company's assets
outstanding options and rights shall have their exerciseability fully
accelerated.
AMENDMENT, SUSPENSIONS AND TERMINATION OF THE 1995 OPTION PLAN
The Board may amend, suspend or terminate the 1995 Option Plan at any
time; provided, however, that shareholder approval is required for any
amendment to the extent necessary to comply with Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 ("Rule 16b-3") or Section 422 of the Code,
or any similar rule or statute. In any event, the 1995 Option Plan will
terminate automatically in 2005.
FEDERAL TAX INFORMATION
Options granted under the 1995 Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or nonstatutory options.
11
<PAGE> 14
An optionee who is granted an incentive stock option will not
recognize taxable income either at the time the option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and one year after exercising the option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods
are not satisfied, the optionee will recognize ordinary income at the time of
sale or exchange equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. A different rule for measuring
ordinary income upon such a premature disposition may apply if the optionee is
also an officer, director, or 10% Shareholder of the Company. The Company will
be entitled to a deduction in the same amount as the ordinary income recognized
by the optionee. Any gain or loss recognized on such a premature disposition
of the shares in excess of the amount treated as ordinary income will be
characterized as long-term or short-term capital gain or loss, depending on the
holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any
taxable income at the time he is granted a nonstatutory option. However, upon
its exercise, the optionee will recognize taxable income generally measured as
the excess of the then fair market value of the shares purchased over the
purchase price. Any taxable income recognized in connection with an option
exercise by an optionee who is also an employee of the Company will be subject
to tax withholding by the Company. Upon resale of such shares by the optionee,
any difference between the sales price and the optionee's purchase price, to
the extent not recognized as taxable income as described above, will be treated
as long-term or short-term capital gain or loss, depending on the holding
period.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the optionee with respect to shares acquired
upon exercise of a nonstatutory option.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE 1995 OPTION PLAN, DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE OPTIONEE'S DEATH OR
THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN
OPTIONEE MAY RESIDE.
PARTICIPATION IN THE 1995 OPTION PLAN
As of the date of this proxy statement, there has been no determination
by the Board or the Committee with respect to future awards under the 1995
Option Plan. Accordingly, future awards are not determinable. The following
table sets forth information with respect to options granted under the 1985
Option Plan during the fiscal year ended March 31, 1995 to (i) the Company's
"Named Officers", (ii) all current executive officers as a group, (iii) all
current directors who are not executive officers as a group and (iv) all
employees, including all current officers who are not executive officers, as a
group. The term of all options outstanding under the Option Plan is ten years
from the date of grant.
<TABLE>
<CAPTION>
SHARES SUBJECT WEIGHTED AVERAGE
TO OPTIONS EXERCISE PRICE
NAME AND POSITION GRANTED PER SHARE
- ----------------- ------- ---------
<S> <C> <C>
Kenneth P. Ostrow - -
President and Chief Executive Officer
Robert M. Gorski 15,000 $1.875
Vice President, Finance and Chief Financial Officer
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C> <C>
John F. Lynch, III 15,000 $1.875
Vice President, International Sales and Service
All current executive officers as a group. 30,000 $1.875
All current directors who are not executive officers as a group. - -
All employees, including all current officers who are not 102,050 $1.875
executive officers, as a group.
</TABLE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the current
fiscal year ending March 31, 1995. Such selection is being presented to the
shareholders for ratification at the Annual Meeting. The affirmative vote of
the holders of a majority of the shares represented and voting at the meeting
is required to ratify the selection. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
Price Waterhouse LLP has audited the Company's financial statements
since 1982. A representative of Price Waterhouse is expected to be present at
the meeting, will have the opportunity to make a statement if desired, and is
expected to be available to respond to appropriate questions from shareholders.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
Proxy card to vote the shares they represent as the Board of Directors may
recommend.
FOR THE BOARD OF DIRECTORS
KENNETH P. OSTROW, President
Dated: October 5, 1995
13
<PAGE> 16
APPENDIX A
IMPACT SYSTEMS, INC.
1995 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 15, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Impact Systems, Inc., a California
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated October 5, 1995, and the
Company's Annual Report on Form Consolidated Financial Statements for the fiscal
year ended March 31, 1995, and hereby appoints Kenneth P. Ostrow and Robert M.
Gorski, and each of them, as proxies and attorneys-in-fact, with full power to
each of substitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Annual Meeting of Shareholders of the Company, to be held
on Wednesday, November 15, 1995, at 3:00 p.m. local time, at the Company's
principal offices located at 1075 East Brokaw Road, San Jose, California 95131,
and at any adjournment or postponement thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote in then and there
personally present, on the matters set forth below:
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS
<S> <C>
____ FOR all nominees listed below ____WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
Joseph J. Cusimano, Kenneth P. Ostrow, Mike N. Zaharna
2. Proposal to approve the 1995 Incentive Stock Option Plan.
____FOR ____AGAINST ____ABSTAIN
3. Proposal to ratify the Board of Director's selection of Price
Waterhouse LLP as the Company's independent accountants for the current fiscal
year ending March 31, 1996.
____FOR ____AGAINST ____ABSTAIN
4. Authority to vote or otherwise represent the shares in their discretion
upon such other matter or matters which may properly come before the meeting or
any adjournment or postponement thereof:
____AUTHORITY GRANTED ____AUTHORITY WITHHELD ____ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF THE THREE NOMINEES FOR DIRECTOR,
FOR APPROVAL OF THE 1995 INCENTIVE STOCK OPTION PLAN, FOR RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS, AND AS PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
- -----------------------------------
Printed Name
- -----------------------------------
Title
- -----------------------------------
Signature
- -----------------------------------
Signature
Dated:_______________________ 1995.
(This Proxy should be marked, dated, and signed by the shareholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. A corporation is requested to sign its name by its President or other
authorized officer, with the office held designated. Executors, administrators,
trustees, etc., are requested to so indicate when signing. If shares are held
in two names, both holders should sign.)
I plan to attend the meeting ____ Yes ____ No
A-1
<PAGE> 17
APPENDIX B
IMPACT SYSTEMS, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees and Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Impact Systems, Inc., a California
corporation.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. A leave of absence approved by the Company shall include sick leave,
military leave, or any other personal leave approved by an
B-1
<PAGE> 18
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
B-2
<PAGE> 19
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option or Stock Purchase Right grant. The
Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase Right.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1995 Incentive Stock Option Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(cc) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
B-3
<PAGE> 20
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 500,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
Subject to Section 16(b). With respect to Option or Stock Purchase Right grants
made to Employees who are also Officers or Directors subject to Section 16(b) of
the Exchange Act, the Plan shall be administered by (A) the Board, if the Board
may administer the Plan in a manner complying with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and
B-4
<PAGE> 21
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.
(iii) Administration With Respect to Other Persons. With
respect to Option or Stock Purchase Right grants made to Employees or
Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
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<PAGE> 22
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable
to Options and Stock Purchase Rights and any Restricted Stock; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. If otherwise eligible, an Employee or Consultant who
has been granted an Option or Stock Purchase Right may be granted additional
Options or Stock Purchase Rights.
6. Limitations.
(a) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year
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<PAGE> 23
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 500,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options and Stock Purchase Rights to purchase up to an
additional 500,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option or Stock Purchase Right is canceled in
the same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the canceled Option or
Stock Purchase Right will be counted against the limits set forth in subsections
(i) and (ii) above. For this purpose, if the exercise price of an Option or
Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new Option
or Stock Purchase Right.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 19 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
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<PAGE> 24
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
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<PAGE> 25
(v) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment;
or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is
B-9
<PAGE> 26
specified in the Notice of Grant, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
In the absence of a specified time in the Notice of Grant, the Option shall
remain exercisable for three (3) months following the Optionee's termination. In
the case of an Incentive Stock Option, such period of time for exercise shall
not exceed three (3) months from the date of termination. If, on the date of
termination, the Optionee is not entitled to exercise the Optionee's entire
Option, the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in
status from Consultant to Employee or Employee to Consultant, an Optionee's
Continuous Status as an Employee or Consultant shall not automatically terminate
solely as a result of such change in status. However, in such event, an
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option three months and one day following such change of status.
(c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to individuals subject to Section
16 of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
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<PAGE> 27
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer, which shall in no event exceed six (6)
months from the date upon which the Administrator made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(e) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. An Option
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
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<PAGE> 28
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall have the right to exercise the Option
or Stock Purchase Right as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option or Stock Purchase
Right is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the
B-12
<PAGE> 29
merger or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or quoted,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
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<PAGE> 30
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Stock Purchase Right exceeds, as of the date of grant,
the number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
B-14
