INTELLIGENT ELECTRONICS, INC.
411 Eagleview Boulevard
Exton, PA 19341
(610) 458-5500
NOTICE AND PROXY STATEMENT
--------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD 9:00 A.M. JUNE 8, 1995
To the Shareholders of Intelligent Electronics, Inc.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of
Intelligent Electronics, Inc. (the "Company") will be held at the Four
Seasons Hotel, One Logan Square, Philadelphia, Pennsylvania, 19103, on
June 8, 1995 at 9:00 a.m. for consideration of and action upon the following
matters:
1. To elect three directors for a three-year term;
2. To consider and vote upon a proposal to approve the
adoption of the 1995 Long-Term Incentive Plan;
3. To consider and vote upon a proposal to approve the
adoption of the 1995 Employee Stock Purchase Plan;
4. To ratify the appointment of Price Waterhouse LLP as the
Company's independent public accountants for the fiscal year ending February 3,
1996; and
5. To transact such other business as may properly come
before the Annual Meeting and any adjournment thereof, and matters incident
to the conduct of the Annual Meeting.
The Board of Directors has fixed the close of business on April 18,
1995, as the record date for the determination of holders of Common Stock of
the Company entitled to notice of, and to vote at, the Annual Meeting. The
Company's Annual Report to Shareholders for the year ended January 28, 1995,
accompanies this Notice and Proxy Statement.
SHAREHOLDERS (WHETHER THEY OWN ONE OR MANY SHARES AND WHETHER THEY
EXPECT TO ATTEND THE ANNUAL MEETING OR NOT) ARE REQUESTED TO VOTE, SIGN, DATE
AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS,
Stephanie D. Cohen
Secretary
Exton, PA
May 12, 1995
<PAGE>
INTELLIGENT ELECTRONICS, INC.
411 Eagleview Boulevard
Exton, PA 19341
(610) 458-5500
PROXY STATEMENT
---------------
This Proxy Statement is furnished and is being mailed with the
accompanying proxy on or about May 12, 1995, to each Shareholder of record of
Intelligent Electronics, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company, to be voted
at the Annual Meeting of Shareholders of the Company (the "Meeting") to be
held on June 8, 1995 at 9:00 a.m. at the Four Seasons Hotel, One Logan
Square, Philadelphia, Pennsylvania, 19103, and at any adjournment thereof,
for the purposes stated below.
Any person giving a proxy has the power to revoke it at any time
before its exercise by a later dated proxy, a written revocation sent to the
Secretary of the Company or attendance at the Meeting and voting in person.
In the absence of contrary instructions, properly executed proxies, received
and unrevoked, will be voted by the persons named in the proxy for: (i) the
election of three directors nominated by the Board of Directors for a
three-year term; (ii) the approval of the adoption of the 1995 Long-Term
Incentive Plan; (iii) the approval of the adoption of the 1995 Employee Stock
Purchase Plan; (iv) the ratification of the appointment of Price Waterhouse
LLP as the Company's independent public accountants; and (v) any action, in
their discretion, with respect to such other business as may properly come
before the Meeting and matters incident to the conduct of the Meeting.
Each of the above proposals is discussed below.
VOTING SECURITIES OF THE COMPANY
Only Shareholders of record at the close of business on April 18,
1995, are entitled to notice of, and to vote at, the Meeting. On that date,
the outstanding voting securities of the Company consisted of 31,235,313 shares
of Common Stock. Each share of Common Stock is entitled to one vote on all
matters presented to the Meeting with no right to vote cumulatively. Under
Pennsylvania law and the By-laws of the Company, the presence of a quorum is
required for each matter to be acted upon at the Meeting. The presence at
the Meeting, in person or by proxy, of Shareholders entitled to cast at least
a majority of the votes that all Shareholders are entitled to cast on a
particular matter shall constitute a quorum for the purposes of consideration
and action on the matter. Directors are elected by a plurality vote;
therefore, the three nominees who receive the largest number of votes cast
will be elected as directors. An affirmative vote of a majority of the votes
cast by Shareholders present in person or by proxy and entitled to vote at
the Meeting is required for approval of the other matters presented. Votes
withheld and abstentions will be counted in determining the presence of a
quorum, but will not be voted and will have no effect on matters to be voted
on at the Meeting. Broker non-votes will not be counted in determining the
presence of a quorum and will not be voted.
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF OFFICERS AND DIRECTORS
The following table sets forth, as of March 31, 1995, the number and
percentage of shares of Common Stock which, according to information supplied
to the Company, are beneficially owned by (i) each person who is the
beneficial owner of more than 5% of the Common Stock; (ii) each of the
directors and the nominees for directorship of the Company individually;
(iii) the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers for fiscal year 1994; and
(iv) all current directors and officers of the Company as a group. Under
rules adopted by the Securities and Exchange Commission, a person is deemed
to be a beneficial owner of Common Stock with respect to which he has or
shares voting power (which includes the power to vote or to direct the voting
of the security), or investment power (which includes the power to dispose
of, or to direct the disposition of, the security). A person is also deemed
to be the beneficial owner of shares with respect to which he has the right
to obtain voting or investment power within 60 days, such as upon the
exercise of options or warrants.
<TABLE>
<CAPTION>
Percentage
Amount and Nature of Shares
of Beneficial Outstanding
Name of Beneficial Owner Ownership(a) (if 1% or greater)
------------------------ ------------------- ------------------
<S> <C> <C> <C>
Richard D. Sanford 3,900,100(b) 12.4%
Christopher T.G. Fish 1,228,020(c) 3.9%
Arnold S. Hoffman 60,000 --
Roger J. Fritz 160,004 --
William L. Rulon-Miller 90,136 --
Barry M. Abelson 500,379(d) 1.6%
Michael R. Shabazian 100,000 --
James M. Ciccarelli 102,824 --
John A. Porter 30,000 --
Alex A.C. Wilson 10,000 --
Gregory A. Pratt 113,334 --
Robert P. May 24,000 --
William E. Johnson -- --
Mark R. Briggs 64,100 --
Edward A. Meltzer 25,200 --
Wellington Management Company 1,940,490(e) 6.2%
Montag & Caldwell 3,837,884(f) 12.3%
All directors and officers
as a group (17 persons) 6,220,680 19.3%
(a) Includes the following number of shares purchasable upon the exercise of stock options: Mr. Sanford, 183,334; Mr. Fish,
80,000; Mr. Hoffman, 60,000; Mr. Fritz, 120,000; Mr. Rulon-Miller, 80,000; Mr. Abelson, 60,000; Mr. Shabazian, 100,000; Mr.
Ciccarelli, 80,000; Mr. Porter, 10,000; Mr. Wilson, 10,000; Mr. Pratt, 113,334; Mr. May, 20,000; Mr. Briggs, 64,000; Mr. Meltzer,
21,800; and all directors and officers as a group, 1,069,668.
(b) Includes 205,007 shares held by two charities established by Mr. Sanford, of which Mr. Sanford is a director or trustee. Mr.
Sanford disclaims beneficial ownership as to the shares held by the charities.
(c) Includes 1,062,310 shares owned by Sprint Investments, S.A. The sole shareholder of Sprint Investments, S.A. is a trust, the
beneficiaries of which are the wife and children of Mr. Fish. Also includes 71,710 shares held in a trust (the beneficiary of which
is a child of Mr. Sanford) of which Mr. Fish and Mr. Abelson are co-trustees (as to which shares Mr. Fish disclaims beneficial
ownership) and 4,000 shares held as custodian and in the name of Mr. Fish's daughter.
(d) Includes 71,710 shares held in a trust (the beneficiary of which is a child of Mr. Sanford) of which Mr. Abelson and Mr. Fish
are co-trustees; 128,262 shares held by Mr. Abelson as custodian for the benefit of two children of Mr. Sanford; and 205,007 shares
held by two charities established by Mr. Sanford, of which Mr. Abelson is a director or trustee. Mr. Abelson disclaims beneficial
ownership as to the shares held by the trust and charities and as custodian.
(e) The information with respect to Wellington Management Company was reported on a Schedule 13-G filed by Wellington
Management Company with the Securities and Exchange Commission on February 3, 1995, a copy of which was received by the
Company and relied upon in making this disclosure. The address of Wellington Management Company is 75 State Street, Boston,
Massachusetts, 02109.
(f) The information with respect to Montag & Caldwell was reported on a Schedule 13-G filed by Montag & Caldwell with the
Securities and Exchange Commission on January 10, 1995, a copy of which was received by the Company and relied upon in
making this disclosure. The address of Montag & Caldwell is 1100 Atlanta Financial Center, 3343 Peachtree Road, NE, Atlanta,
Georgia, 30326.
</TABLE>
<PAGE>
<PAGE>
1. ELECTION OF DIRECTORS
In accordance with the Company's By-laws, as amended, the Board of
Directors is classified into three classes as nearly equal in number as
possible. At the Meeting, three directors will be elected, each for a
three-year term expiring at the 1998 Annual Meeting. The Executive Committee
of the Board of Directors has recommended three nominees for election as
directors at the Meeting. It is the intention of the persons named in the
proxy, unless otherwise directed, to vote all proxies for the election to the
Board of Directors of the nominees listed below. The Board of Directors and
the Executive Committee have no reason to believe that any of the nominees
will be unable or unwilling to be a candidate for election at the time of the
Meeting. If any nominee is unable or unwilling to serve, it is presently
intended that the proxy shall be voted for the election of a nominee who will
be designated by the Board or its Executive Committee, or the number of
directors constituting the full Board may be reduced.
Following are the names of the nominees for director of the Company to
serve for a three-year term expiring at the 1998 Annual Meeting of
Shareholders, their ages, and certain other information. The Board
recommends a vote for all nominees.
Name Age Position Term
Barry M. Abelson 48 Director 3 years
William L. Rulon-Miller 46 Director 3 years
William E. Johnson 53 Director 3 years
Barry M. Abelson has been a director of the Company since January
1989. In May 1992 he joined the law firm of Pepper, Hamilton & Scheetz,
Philadelphia, Pennsylvania, as a partner. Prior thereto, Mr. Abelson had
been a partner of the law firm of Braemer Abelson & Hitchner, Philadelphia,
Pennsylvania (and its predecessor firms). During fiscal year 1994, Pepper,
Hamilton & Scheetz provided legal services to the Company. See "Certain
Relationships and Related Transactions." Mr. Abelson is also a member of
the Board of Directors of Covenant Bank for Savings.
William L. Rulon-Miller serves as Senior Vice President and Co-Director
of Investment Banking for Janney Montgomery Scott Inc., an investment banking
firm with which he has held several positions since 1979. Mr. Rulon-Miller
was a director of the Company from April 1983 until December 1986, and was
re-elected to the Board in November 1987. Mr. Rulon-Miller is also a member
of the Board of Directors of Mothers Work, Inc.
William E. Johnson has been a director of the Company since November
1994. He has been President of William E. Johnson Associates, a private
investment company, since 1993. From 1986 to 1992, Mr. Johnson served as
Chairman and CEO of Scientific Atlanta, a telecommunications company.
The names of the other directors of the Company who will continue
after the Meeting, their ages, the term for which they have been elected and
certain other information is set forth below:
<PAGE>
<TABLE>
<CAPTION>
Term Expires at
Name Age Position Annual Meeting in
------------------------- --- -------- -----------------
<S> <C> <C> <S> <C>
Arnold S. Hoffman 59 Director 1997
Roger J. Fritz 66 Director 1997
John A. Porter 51 Director 1997
Alex A.C. Wilson 58 Director 1997
Richard D. Sanford 51 Director 1996
Christopher T.G. Fish 52 Director 1996
James M. Ciccarelli 42 Director 1996
Gregory A. Pratt 46 Director 1996
</TABLE>
Arnold S. Hoffman has been a director of the Company since August
1985. In January 1992, Mr. Hoffman became Managing Director of Legg Mason Wood
Walker Incorporated, an investment banking firm. Prior to that, since
September 1990, Mr. Hoffman was Chairman of the Middle Market Group, L.P., an
investment banking firm. Prior thereto, since August 1989, he served as a
Managing Director of the Stamford Company, Inc., an investment banking firm,
and of the Middle Market Group, Inc.
Roger J. Fritz has been a director of the Company since its
incorporation in 1982. For more than five years, Mr. Fritz has been
President of Organization Development Consultants of Naperville, Illinois, an
organizational development/management consulting firm.
John A. Porter has been a director of the Company since May 1994.
Mr. Porter has been Vice Chairman of LDDS/Metro Media Communications, the fourth
largest long distance carrier, since the fall of 1993. From 1988 until its
merger with Metro Media Communications in 1993, he served as Chairman of
LDDS. Mr. Porter is the president and sole shareholder of PM Restaurant
Group, Inc., which filed a petition under Chapter 11 of the U.S. Bankruptcy
Code in March 1995. Mr. Porter serves on the Board of Directors of Uniroyal
Technology Corporation.
Alex A.C. Wilson has been a director of the Company since May 1994.
Mr. Wilson has served as Senior Vice President of SCI Systems, a worldwide
contract manufacturing company in the electronics industry, since November
1993, and is General Manager for the European operations. Prior thereto, he
worked for IBM Corporation as Director of Manufacturing and Distribution. In
his 27-year career with IBM Corporation, Mr. Wilson worked in various
capacities. Mr. Wilson resides in Scotland and is a citizen of the United
Kingdom.
Richard D. Sanford has been the Company's Chairman and Chief Executive
Officer since he founded the Company in May 1982. See "Certain Relationships
and Related Transactions."
Christopher T.G. Fish has been a director of the Company since its
incorporation in 1982. For more than five years, Mr. Fish has been a
principal of Sprint Investments, S.A., an investor company which is a holder
of the Company's Common Stock. Mr. Fish resides in the Channel Islands, U.K.
and is a citizen of the United Kingdom.
James M. Ciccarelli was elected to the Company's Board of Directors
in August 1992 and was elected a Vice President of the Company in March 1990.
He was CEO and President of Wireless Telecom, Inc., a former wholly-owned
subsidiary of the Company from October 1993 until it was sold in November
1994. From December 1991 through April 1993 he was President of the
Company's Systems Group. Prior thereto, from January 1988 until January
1990, he served in a number of executive positions in the operations and
management of Connecting Point of America, Inc., which the Company acquired
in August 1989.
Gregory A. Pratt has been a director of the Company since May 1994.
Mr. Pratt joined the Company in March 1992 as Executive Vice President and
was appointed to the position of President and Chief Operating Officer
shortly thereafter. Prior to joining the Company, Mr. Pratt served as
President of Atari Computer Corporation and Vice President of Finance and
Chief Financial Officer of Atari Corporation. He also served on the Board of
Directors of Atari Corporation and was a member of that Board's Executive
Committee.
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held four meetings and acted by
written consent seven times during the fiscal year ended January 28, 1995.
During fiscal year 1994, each member of the Board attended at least 75% of
the aggregate meetings of the Board and its Committees for which he is a
member, except Michael R. Shabazian, a current director of the Company whose
term expires on the date of the Meeting.
The Board of Directors has established Audit, Compensation and Stock
Option, Investment and Finance, and Executive Committees to devote attention
to specific subjects and to assist in the discharge of its responsibilities.
The functions of those committees, their current members and the number of
meetings held during fiscal year 1994 are described below. The Board of
Directors has not established a Nominating Committee.
Audit Committee The Audit Committee is currently composed of Messrs.
Fish, Fritz, Hoffman and Rulon-Miller. The functions of the Audit Committee
include the recommendation and selection of independent accountants, the
review of audit results and the evaluation of internal accounting procedures
of the Company. There were two meetings of the Audit Committee during fiscal
year 1994.
Compensation and Stock Option Committee The Compensation and Stock
Option Committee is currently composed of Messrs. Abelson, Fritz, Hoffman and
Rulon-Miller. The Compensation and Stock Option Committee is responsible for
determining the annual salary, bonus and incentive compensation of the
Company's executive officers and, on the basis of recommendations received
from executive officers, awarding incentive compensation in the form of stock
options to the Company's employees generally. The Report of the Compensation
and Stock Option Committee is included later in this Proxy Statement. There
were six meetings of the Compensation and Stock Option Committee during
fiscal year 1994.
Investment and Finance Committee The Investment and Finance Committee
is currently composed of Messrs. Abelson, Ciccarelli, Fish, Hoffman,
Rulon-Miller, Pratt, Shabazian and Robert P. May, a current director of the
Company whose term expires on the date of the Meeting. The functions of the
Investment and Finance Committee, which did not meet formally during fiscal
year 1994, is to review and make recommendations to the Board of Directors as
to available investment opportunities to the Company as well as reviewing the
Company's investment policies generally.
Executive Committee The Executive Committee is currently composed of
Messrs. Abelson, Fish, Fritz, Hoffman, Johnson, Porter, Rulon-Miller, Sanford
and Wilson, and has the authority of the Board of Directors in the management
of the business and affairs of the Company, subject to applicable legal
limitations. There was one meeting of the Executive Committee during fiscal
year 1994.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the years ended January 28, 1995, January 29, 1994,
and January 30, 1993, to the Company's Chief Executive Officer and each of
the Company's four other most highly compensated executive officers based on
salary and bonus earned during fiscal year 1994 (the "named executive
officers").
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Annual Compensation Awards
-------------------------------------------- -----------
Securities
Name and Principal Fiscal Underlying All Other
Position Year Salary($) Bonus($) Options (#) Compensation ($)(1)
- --------------------------- ----- --------- -------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <S> <C>
Richard D. Sanford 1994 $850,000 $ 0 None $496,945
Chairman of the 1993 850,000 569,160 450,000 457,205
Board and Chief 1992 748,056 450,000 None 476,075
Executive Officer
Gregory A. Pratt 1994 500,000 30,000 None 3,178
President and Chief 1993 272,500 410,000 150,000 73,757
Operating Officer 1992 214,892(2) 0 450,000(3) 2,660
Mark R. Briggs 1994 325,000 38,500 50,000 3,792
Senior Vice 1993 210,000 221,900 10,000 4,513
President 1992 200,833 41,800 None 2,866
Robert P. May 1994 300,000 21,875 None 293,249
Senior Vice 1993 75,000(4) 187,500 100,000 5,480
President 1992
Edward A. Meltzer 1994 147,462 6,250 10,000 4,457
Vice President 1993 130,190 50,750 5,000 3,521
and Chief 1992 107,105 5,690 None 2,225
Financial Officer
______________________________________________________________
(1) Except as indicated below, the amount included in this column for fiscal year 1994 represent the matching contributions under
the Company's 401(k) Plan and Supplemental 401(k) Plan (Mr. Sanford, $4,620; Mr. Pratt, $3,178; Mr. Briggs, $3,792; Mr. May,
$2,423 and Mr. Meltzer, $4,457). The Company is a party to "split dollar" life insurance agreements with a trust established by
Mr. Sanford (of which Mr. Abelson, a member of the Board of Directors, is the trustee) under which the trust pays the portion
of the premiums attributable to the death benefit under permanent life insurance policies insuring the life of Mr. Sanford and
owned by the trust, and the Company pays the balance of the premiums. Upon the termination of the agreements or Mr.
Sanford's death, all premiums previously advanced by the Company under the policies are required to be repaid by the trust. The
Company retains an interest in the policies' cash values and excess death benefits to secure the trust's repayment obligation.
Included in the amounts shown for Mr. Sanford in fiscal years 1992, 1993 and 1994 are amounts representing the value of the
premium payments by the Company in such years, projected on an actuarial basis assuming that Mr. Sanford retires at age 65
and the agreements are then terminated. In addition, in fiscal year 1994, the Company entered into a deferred compensation
agreement with Mr. Sanford which provides for the Company to credit $716,715 annually for Mr. Sanford's account for five years
commencing in fiscal year 1994, together with interest at an annual rate of 7%, compounded annually. All credited amounts will
be paid to Mr. Sanford in five equal annual installments commencing in fiscal year 1999. In the event of his death, disability,
termination by the Company without cause or a change of control of the Company, all amounts not yet credited for future periods
will be credited and all credited amounts will be paid to Mr. Sanford. Included in the amount shown for Mr. May in fiscal year
1994 is $246,667 for a payment relating to a non-compete agreement and $44,159 of relocation expenses.
(2) Mr. Pratt began his employment with the Company on March 4, 1992.
(3) Of the 450,000 options identified above, 225,000 granted on March 4, 1992 were canceled in July 1992.
(4) Mr. May began his employment with the Company on November 1, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Option Grants During Fiscal Year 1994
The following table provides information related to options to purchase Common Stock which were granted to the named
executive officers during fiscal year 1994.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
- ------------------------------------------------------------------------------------------------------ ---------------------------
Number of % of Total
Securities Under- Options Granted Exercise or
lying Options to Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
- -------------------- ------------------ --------------- -------------- ----------------- ------------ -----------
<S> <C> <S>
Richard D. Sanford ---- ---- ---- ---- ---- ----
Gregory A. Pratt ---- ---- ---- ---- ---- ----
Mark R. Briggs 50,000(2) 5.3% $24.00 February 25, 2004 $754,674 $1,912,491
Robert P. May ---- ---- ---- ---- ---- ----
Edward A. Meltzer 10,000(2) 1.1% 24.00 February 25, 2004 150,935 832,498
____________________________________
(1) The potential realizable value portion of the foregoing table illustrates value that might be realized upon exercise of the
options immediately prior to the expiration of their term, assuming the specified compounded rates of appreciation of the
Company's Common Stock over the term of the options.
(2) The options become exercisable in five equal annual installments beginning February 25, 1995.
On February 25, 1995, the Board of Directors of the Company authorized the repricing of all outstanding options with
exercise prices in excess of $13.25 to $13.25 per share. As of that date, 2,067,370 options were repriced, of which 345,158 were
exercisable at January 28, 1995.
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option Exercises During Fiscal Year 1994 and Option Values at January 28, 1995
The following table provides information related to options to purchase Common Stock which were exercised by the named
executive officers during fiscal year 1994 and the number and value of options held on January 28, 1995.
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)(2)
Shares Acquired Value -------------------------- --------------------------
Name on Exercise(#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ---------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <S> <C> <C> <C> <C>
Richard D. Sanford ---- ---- 163,334 366,666 $96,250 $ 8,750
Gregory A. Pratt 30,000 $165,000 58,334 241,666 ---- ----
Mark R. Briggs 40,000 552,500 12,000 118,000 ---- 97,500
Robert P. May ---- ---- 20,000 80,000 ---- ----
Edward A. Meltzer ---- ---- 18,800 15,200 63,000 ----
___________________________________
(1) Represents the difference between the exercise price and the market value on the date of exercise.
(2) Value based on the closing price of $9.75 per share on January 27, 1995.
</TABLE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Abelson, a member of the Compensation and Stock Option Committee, is a
partner in the law firm of Pepper, Hamilton & Scheetz, which provided legal
services to the Company. See "Certain Relationships and Related
Transactions".
Stock Performance Chart
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five fiscal
years ended January 28, 1995, with the cumulative total return on the S&P Mid
Cap 400 Index and a peer index comprised of ten companies (1). The
comparison assumes $100 was invested on January 31, 1990, in the Company's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P MID-CAP 400, AND PEER GROUP
MEASUREMENT PERIOD S&P INTELLIGENT
FISCAL YEAR ENDED: PEER GROUP MID-CAP 400 ELECTRONICS
JANUARY 1990 $100.00 $100.00 $100.00
JANUARY 1991 112.29 111.84 254.55
JANUARY 1992 207.52 158.33 379.55
JANUARY 1993 255.21 176.28 263.64
JANUARY 1994 384.85 203.01 562.85
JANUARY 1995 201.87 193.28 203.21
(1) Assumes $100 invested on January 31, 1990 in the Company's Common Stock,
the S&P Mid Cap 400 Index and a composite index, weighted by market
capitalization, of the following ten companies: Ameridata Technologies, Inc.,
Compucom Systems, Inc., Dataflex Corporation, The Future Now, Inc.,
Government Technology Services, Inc., Inacom Corp., Merisel, Inc., MicroAge,
Inc., Random Access, Inc., and Tech Data Corporation.
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee")
for fiscal year 1994 consisted of four non-employee directors. The Committee
is responsible for determining the annual salary, bonus and incentive
compensation of the Company's executive officers and, on the basis of
recommendations received from executive officers, awarding incentive
compensation in the form of stock options to the Company's employees
generally. This report describes the policies of the Committee in
establishing the principal components of executive compensation for fiscal
year 1994.
The Committee's compensation policies for executive officers reflect
a commitment to attract and retain quality executives, to provide incentives
to the executives to achieve performance objectives that enhance shareholder
value and to reward executives for operational excellence. The Committee
believes that its policies are best served by a compensation program that
provides executives a competitive base salary, annual incentive bonuses in
amounts that reflect achievement of prescribed financial targets and
long-term incentives in the form of stock options.
In establishing compensation for executive officers, the Committee
considers industry data generally, the Company's financial performance and
industry position and the recommendations of the Chairman of the Board and
Chief Executive Officer. The Committee exercises judgment and discretion in
the information and analyses it reviews and considers.
In 1993, the Committee adopted a plan for Richard D. Sanford, the
Chairman of the Board and Chief Executive Officer, which governed his
compensation during fiscal years 1993 and 1994. In 1994, the Committee
adopted a plan for Gregory A. Pratt, the President and Chief Operating
Officer, which governed his compensation during fiscal year 1994. The plans
tied the amount of the bonus opportunity to Mr. Sanford and Mr. Pratt to the
Company's achievement of budgeted pre-tax earnings from continuing
operations. Additionally, for Mr. Pratt, certain focus areas were separately
identified to incent performance of specific operational and financial
objectives.
In accordance with the incentive plan adopted in 1993, Mr. Sanford's
base salary did not increase in fiscal year 1994 over its 1993 level. No
stock options were granted to Mr. Sanford in fiscal year 1994. Furthermore,
in light of the Company's operating results during 1994, Mr. Sanford declined
to accept a bonus even though the Company achieved budgeted pre-tax earnings
targets for the first quarter of fiscal year 1994.
In recognition of his substantial past contributions to the Company
and as an incentive to his continuing efforts on behalf of the Company, the
Committee approved and the Company entered into a deferred compensation
agreement with Mr. Sanford in fiscal year 1994, as described under "Executive
Compensation".
Section 162(m) of the Internal Revenue Code imposes a $1 million
limit on the allowable tax deduction of compensation paid by a publicly-held
corporation to its chief executive officer and its other four most highly
compensated officers employed at year-end, subject to certain pre-established
objective performance-based exceptions. The Committee intends to take
Section 162(m) into account when formulating its compensation policies for
the Company's executive officers and to comply with Section 162(m), if and
where the Committee determines compliance to be practicable and in the best
interests of the Company and its shareholders.
William L. Rulon-Miller
Barry M. Abelson
Roger J. Fritz
Arnold S. Hoffman
<PAGE>
<PAGE>
DIRECTOR COMPENSATION
Directors received $500 for each Board meeting attended during the
fiscal year ended January 28, 1995. Directors are also reimbursed for
expenses in attending Board meetings. There was no additional compensation
for participation in or attendance at Committee meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Barry M. Abelson is a partner in the law firm of Pepper, Hamilton &
Scheetz, which provided legal services to the Company in fiscal year 1994.
The Company believes that the fees charged by Pepper, Hamilton & Scheetz are
comparable to those charged by other law firms for comparable services.
During fiscal years 1992, 1993 and 1994, the Company paid $45,000,
$171,000 and $189,000, respectively, to Mr. Sanford and his affiliates for
the business use by the Company, its customers and suppliers (certain of
which reimbursed the Company) for charter cruise services. The payments were
computed at the same rates available to unrelated third parties for such
services.
In March 1995, Mr. Sanford reimbursed the Company for travel expenses
previously advanced on his behalf by the Company. Of the amount reimbursed,
which included interest, approximately $61,000 related to expenses incurred
in fiscal year 1993 and approximately $101,000 related to expenses incurred
in fiscal year 1994.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulation
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 with
respect to fiscal year 1994, or written representations from certain
reporting persons, the Company believes that all filing requirements
applicable to its directors, officers and persons who own more than 10% of a
registered class of the Company's equity securities have been met. During
the fiscal year ended January 28, 1995, Mr. Shabazian filed one Form 4
reporting one transaction after the applicable due date.
<PAGE>
2. PROPOSED APPROVAL OF THE ADOPTION OF THE
COMPANY'S 1995 LONG-TERM INCENTIVE PLAN
The Board of Directors believes that the grant of stock, stock-related
and performance-based awards is an effective method of attracting and
retaining valuable employees and directors and also serves to strengthen the
identity of interest between them and the Company. In order to enhance the
ability of the Company to recruit and retain talented employees and
directors, on April 20, 1995, the Board of Directors of the Company adopted
the 1995 Long-Term Incentive Plan (the "Incentive Plan"), subject to
shareholder approval. A copy of the Incentive Plan is included herein as
Appendix "A," and the description of the principal features of the Incentive
Plan is qualified in its entirety by reference thereto.
The Incentive Plan is intended to provide the Company flexibility to
adapt the compensation of key employees and provide compensation to directors
in a changing business environment. The Incentive Plan permits the granting
of any or all of the following types of awards ("Awards"): (i) Stock Options,
including Non-Qualified and Incentive Stock Options; (ii) Stock Appreciation
Rights; (iii) Restricted Stock; (iv) Long-Term Performance Awards; (v)
Performance Shares; and (vi) Performance Units. If approved by shareholders
at the Meeting, no further grants of stock options will be made under the
Company's Non-Qualified Stock Option Plan for Employees and Directors,
adopted in 1983.
Officers and other employees of the Company (including directors) or
its subsidiaries are eligible to receive Awards under the Incentive Plan.
Directors who are not employees of the Company or a subsidiary are eligible
to be granted Awards under the Incentive Plan other than Incentive Stock
Options. As of March 31, 1995, the Company and its subsidiaries employed
approximately 1,140 full-time employees.
The Incentive Plan will be administered by the Compensation and Stock
Option Committee of the Board of Directors (the "Committee"). The Committee
will select those persons eligible to receive Awards from time to time and
will determine the type, terms and conditions of Awards. The Committee will
have the authority to interpret the provisions of the Incentive Plan.
The Board may generally amend, alter or discontinue the Incentive Plan
at any time, but no amendment, alteration or discontinuation will be made
which would impair the rights of a participant with respect to an Award which
has been made under the Incentive Plan. Without shareholder approval, the
Board may not effect any amendment to the Incentive Plan which, if not
approved by shareholders, would result in a failure of transactions under the
Incentive Plan to qualify for the benefit of Rule 16b-3.
The maximum number of shares of Common Stock of the Company that may
be made the subject of Awards granted under the Incentive Plan is 5 million.
No participant will be awarded a Long-Term Performance Award with a dollar
value in excess of $1 million for the performance period to which the Long-Term
Performance Award relates. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure affecting the Common Stock, the Committee will adjust accordingly
the number, type and issuer of shares reserved for issuance under the
Incentive Plan, the number and option price of shares subject to outstanding
Options granted under the Incentive Plan and the number and price of shares
subject to other Awards made under the Incentive Plan. In addition, the
shares related to the unexercised or undistributed portion of any terminated,
expired or forfeited Award will also be made available for distribution in
connection with future Awards. No individual may receive, over the term of
the Incentive Plan, more than an aggregate of 1.5 million shares of Common
Stock under the Incentive Plan.
Stock Options
-------------
The Incentive Plan permits the Committee to grant to any participant
Non-Qualified Stock Options and, to participants who are also employees,
Incentive Stock Options. The per share exercise price of a Stock Option will
be determined by the Committee; provided, however, that the exercise price
per share of Common Stock purchasable under an Incentive Stock Option will
not be less than 100% of the fair market value of the Common Stock at the
time of grant (and not less than 110% in the case of an Incentive Stock
Option granted to a participant who, at the time the Option is granted, owns
more than 10% of the voting power of all classes of stock of the Company (a
"10% Owner")). The provisions of Stock Option awards need not be the same
with respect to each recipient.
Subject to the limitations of the Incentive Plan, each Stock Option
will be exercisable at such time or times and in the installments determined by
the Committee. No Stock Option will be exercisable more than ten years after
the date it is granted. An Incentive Stock Option granted to a 10% Owner
will not have a term of more than five years. Incentive Stock Options are
subject to additional restrictions imposed by the Internal Revenue Code of
1986, as amended (the "Code"). Stock Options are not transferable by the
participant other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order, and all Stock Options will
be exercisable, during the participant's lifetime, only by the participant.
In the discretion of the Committee, the purchase price for shares acquired
pursuant to the exercise of a Stock Option may be paid in cash or by shares
of Restricted or unrestricted shares of Common Stock. In the event of a
Change of Control (defined below), the Committee may, in its discretion,
cause all outstanding Stock Options to immediately become vested. When a
participant gives notice of exercise of an Option, the Committee may elect to
terminate all or part of the portion of the Option(s) proposed to be
exercised provided the Company pays the participant an amount in cash equal
to the excess of the fair market value of the Common Stock otherwise issuable
over the exercise price on the effective date of such cash-out. In addition,
the Committee may require that all or part of the shares to be issued
pursuant to exercise of an Option take the form of Restricted Stock. The
Committee may also agree to cooperate in a "cashless exercise" of a Stock
Option, which will be effected by the participant delivering to a securities
broker instructions to sell a sufficient number of shares of Common Stock to
cover the costs and expenses associated therewith.
Under the Code, a participant will not recognize taxable income upon
grant or exercise of an Incentive Stock Option and the Company and its
subsidiaries will not be entitled to any deduction with respect thereto.
However, upon the exercise of an Incentive Stock Option, the excess of the
fair market value on the date of exercise of the shares received over the
exercise price of shares will be treated as an adjustment to alternative
minimum taxable income. Consequently, exercise of an Incentive Stock Option
could subject an optionee to alternative minimum tax or increase an
optionee's alternative minimum taxable income. In order for the exercise of
an Incentive Stock Option to qualify for the foregoing tax treatment, the
participant generally must be an employee of the Company or a subsidiary from
the date the Incentive Stock Option is granted through the date three months
before the date of exercise, except that special rules apply in the case of
death of disability.
If the participant has held the shares acquired upon exercise of an
Incentive Stock Option for at least two years after the date of grant and for
at least one year after the date of exercise, upon disposition of the shares
by the participant, the difference, if any, between the sales price of the
shares and the exercise price of the Option will be treated as long-term
capital gain or loss. If the participant does not satisfy these holding
period requirements, a "disqualifying disposition" occurs and the participant
will recognize ordinary income in the year of the disposition of the shares
in an amount equal to the excess of the fair market value of the shares at
the time the Option was exercised over the exercise price of the Option. The
balance of gain realized, if any, will be long-term or short-term capital
gain, depending upon whether or not the shares were sold more than one year
after the Option was exercised. If the participant sells the shares prior to
the satisfaction of the holding period requirements but at a price below the
fair market value of the shares at the time the Option was exercised, the
amount of ordinary income will be limited to the amount realized on the sale
in excess of the exercise price of the Option. The Company and its
subsidiaries will generally be allowed a deduction to the extent the
participant recognizes ordinary income.
In general, a participant to whom a Non-Qualified Stock Option is
granted will recognize no income when the Option is granted. Upon exercise
of a Non-Qualified Stock Option, the participant will recognize ordinary
income equal to the excess of the fair market value of the shares on the date
of exercise over the exercise price of the Option unless the shares received
are Restricted Stock, in which case, unless the exercising participant elects
to recognize such income, the income recognition is deferred until the
restrictions lapse or the Restricted Stock becomes transferable. The
Company will generally be entitled to a compensation deduction in the same
amount and at the same time as the participant recognizes ordinary income and
will comply with applicable withholding requirements with respect to such
compensation.
There are no tax consequences to a participant or to the Company if a
Stock Option lapses before it is exercised or forfeited.
Stock Appreciation Rights
-------------------------
The Incentive Plan permits the grant of Stock Appreciation Rights in
connection with the grant of Stock Options. A Stock Appreciation Right or
the applicable portion thereof granted with respect to a given Stock Option
will generally terminate and no longer be exercisable upon the termination or
exercise of the related Stock Option. A Stock Appreciation Right permits the
participant to receive, upon exercise of the Stock Appreciation Right, an
amount in cash and/or shares of Common Stock equal in value to the excess of
the fair market value of one share of Common Stock over the exercise price
per share specified in the related Stock Option, multiplied by the number of
shares in respect of which the Stock Appreciation Right will have been
exercised. The Committee will have the right to determine the form of
payment. Stock Appreciation Rights will be exercisable only at such time or
times and to the extent that the Stock Options to which they relate will be
exercisable; provided, however, that any Stock Appreciation Right granted
subsequent to the grant of the related Stock Option will, in general, not be
exercisable during the first six months of its term.
Upon exercise of a Stock Appreciation Right, the participant will
recognize ordinary income in an amount equal to the cash or the fair market
value of the shares received on the exercise date. The Company will
generally be entitled to a compensation deduction in the same amount and at
the same time that participant holding a Stock Appreciation Right recognizes
ordinary income, and will comply with applicable withholding requirements
with respect to such compensation.
Restricted Stock
----------------
Shares of Restricted Stock may be issued either alone or in addition
to other Awards granted under the Incentive Plan. The Committee will determine
the recipients of shares of Restricted Stock, the number of shares to be
awarded, the price (if any) to be paid by such recipient, the time or times
within which such Awards may be subject to forfeiture, and all other
conditions of the Award. The provisions of Restricted Stock Awards need not
be the same with respect to each recipient. The Company will issue a
certificate to each recipient representing the shares of Restricted Stock,
which will bear a legend marking such stock as Restricted Stock. Although
such certificate(s) will be held in custody by the Company until the
restrictions thereon have elapsed, such recipient will have, with respect to
the shares of Restricted Stock, all rights of a shareholder of the Company,
including the right to vote the shares, and the right to receive any cash
dividends. The Committee, at the time of Award, may permit or require the
payment of cash dividends to be deferred and reinvested in additional shares
of Restricted Stock. During the Restriction Period set by the Committee, the
participant will not be permitted to transfer or encumber shares of
Restricted Stock; provided that the Committee may provide for the lapse of
such restrictions in installments and may accelerate or waive such
restrictions in whole or in part. Upon the expiration of the Restriction
Period without a prior forfeiture of the Restricted Stock, the certificates
for such shares of Restricted Stock will be delivered to the participant
receiving the Award. In the event of a Change of Control, the Committee may,
in its discretion, cause all forfeiture limitations on Restricted Stock to
lapse and a stock certificate or certificates representing such unrestricted
shares to be issued to the participant.
Unless the participant elects to recognize income at the time of a
Restricted Stock award, a participant will not recognize taxable income until
the shares are no longer subject to a substantial risk of forfeiture or
become transferable. In either event, the participant's recognized income
will equal the excess of the fair market value of such shares at grant if an
election is made, or at the time the restrictions lapse or are removed, and
any amount paid for such Common Stock (the "Bargain Element"). The Company
will generally be entitled to a deduction in the same amount, and in the same
year as the recipient of Restricted Stock has income. The Company will
comply with all applicable withholding requirements with respect to such
income.
The aforementioned election allows the participant to recognize the
Bargain Element as income in the year of the Award by making an election with
the Internal Revenue Service within 30 days after the Award is made.
Dividends received by a participant on Restricted Stock during the Restricted
Period are taxable to the participant as ordinary compensation income and
will be deductible by the Company unless the aforementioned election is made,
rendering dividends taxable as dividends and nondeductible.
Long-Term Performance Awards
----------------------------
The Incentive Plan permits the Committee to grant to any participant
Long-Term Performance Awards. The Committee will determine in advance the
nature, length and starting date of the performance period for each Long-Term
Performance Award, which will be at least two years, and will determine the
performance objectives to be used in valuing Long-Term Performance Awards and
determining the extent to which such Long-Term Performance Awards have been
earned. Performance objectives may vary from participant to participant and
between groups of participants. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives
to a Long-Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long-Term
Performance Awards affected. Performance Awards may be denominated in
dollars or in shares of Common Stock, and to the extent that the relevant
measure of performance is met, payments may be made in the form of cash or
Common Stock, including shares of Restricted Stock, either in a lump sum
payment or in annual installments commencing as soon as practicable after the
end of the relevant performance period. Unless otherwise provided in the
applicable Award agreement, if a participant terminates service with the
Company during a performance period because of death, disability or
retirement, the participant will be entitled to a payment with respect to
each outstanding Long-Term Performance Award at the end of the applicable
performance period based upon the participant's performance for the portion
of such performance period ending on the date of termination and pro-rated
for the portion of the performance period during which the participant was
employed by or served on the Board of Directors of the Company, as determined
by the Committee. In the event of a Change of Control, the Committee may, in
its discretion, cause all conditions applicable to a Long-Term Performance
Award to immediately terminate and a stock certificate or cash, as the case
may be, to be issued or paid to the participant.
A participant receiving a Long-Term Performance Award will recognize
taxable income when an Award is paid at which time the participant will
realize income in an amount equal to the amount of cash received or the fair
market value of shares received in payment. The Company will generally be
entitled to a corresponding deduction at such time, and will comply with
applicable withholding requirements with respect thereto. If Restricted
Stock is used in payment of a Long-Term Performance Award, the participant's
federal income tax consequences will be as described above under "Restricted
Stock."
Performance Shares
------------------
The Committee will determine the persons to whom Performance Shares
will be granted and the times and the number of such Performance Shares that
will be granted. Performance Shares are awards of the right to receive Common
Stock at the end of a specified period upon the attainment of performance
goals specified by the Committee at the time of grant. The provisions of the
Performance Shares need not be the same with respect to each participant.
Performance Shares generally will be forfeited if the participant ceases to
be an employee of the Company during the Performance period for any reason
other than death, disability or retirement. In the event of death,
disability or retirement, the participant or the participant's estate, as the
case may be, will be entitled to receive, at the expiration of the
performance period, a percentage of Performance Shares that is equal to the
percentage of the performance period that had elapsed as of the date of death
or date on which such disability or retirement commenced, provided that the
Committee determines that the applicable performance goals have been met. In
the event of a Change of Control, the Committee may, in its discretion, cause
all conditions applicable to the Performance Shares to immediately terminate
and the full number of shares of Common Stock subject to the Performance
Shares award to be issued to the participant.
At the end of a performance period, the participant will recognize
ordinary income in an amount equal to the fair market value of the Common
Stock received. The Company will generally be entitled to a compensation
deduction in the same amount and at the same time as the participant of a
Performance Share award recognizes ordinary income, and will comply with
applicable withholding requirements with respect thereto.
Performance Units
-----------------
The Committee will determine the persons to whom Performance Units
will be granted and the times and the number of such Performance Units that
will be granted. Performance Units are awards of the right to receive a fixed
dollar amount, payable in cash, at the end of a specified period upon the
attainment of performance goals specified by the Committee at the time of the
grant. The provisions of Performance Unit awards need not be the same with
respect to each participant. Performance Units will be forfeited if the
participant ceases to be an employee of the Company during the Performance
period for any reason other than death, disability or retirement. In the
event of death, disability or retirement, the participant or his or her
estate will be entitled to receive, at the expiration of the performance
period, cash for a percentage of his or her Performance Units equal to the
percentage of the performance period that elapsed at the time of death or
commencement of disability or retirement, provided that the Committee
determines that the applicable performance goals have been met. In the event
of a Change of Control, the Committee may, in its discretion, cause all
conditions applicable to Performance Units to terminate and a cash payment
for the full amount of the Performance Unit to be made to the participant.
At the end of a performance period, the participant will recognize
ordinary income in an amount equal to the cash received on such date. The
Company will generally be entitled to a compensation deduction in the same
amount and at the same time as the participant of a Performance Unit award
recognizes ordinary income, and will comply with applicable withholding
requirements with respect thereto.
For purposes of the Incentive Plan, the term "Change of Control" means
(i) the acquisition in one or more transactions by any person (including any
group acting in concert) of beneficial ownership of 25% or more of the
combined voting power of the Company's then outstanding voting securities
(the "Voting Securities"), excluding Voting Securities acquired directly from
the Company (but such Voting Securities shall be included in the calculation
of the total number of Voting Securities then outstanding); or (ii) approval
by shareholders of the Company of (A) a merger, reorganization or
consolidation involving the Company if the shareholders of the Company
immediately before such merger, reorganization or consolidation do not or
will not own directly or indirectly immediately following such merger,
reorganization or consolidation, more than fifty percent (50%) (or such other
percentage ranging from fifty percent (50%) to and including seventy-five
percent (75%), that the Committee may, in its discretion, specify from time
to time in general or with respect to any particular merger, reorganization
or consolidation) of the combined voting power of the outstanding voting
securities of the corporation resulting from or surviving such merger,
reorganization or consolidation in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately before such
merger, reorganization or consolidation or (B) (1) a complete liquidation or
dissolution of the Company or (2) an agreement for the sale or other
disposition of all or substantially all of the assets of the Company; or (3)
acceptance by shareholders of the Company of shares in a share exchange if
the shareholders of the Company immediately before such share exchange do
not or will not own directly or indirectly immediately following such share
exchange more than fifty percent (50%) (or such other percentage ranging from
fifty percent (50%) to and including seventy-five percent (75%), that the
Committee may, in its discretion, specify from time to time in general or
with respect to any particular share exchange) of the combined voting power
of the outstanding voting securities of the corporation resulting from or
surviving such share exchange in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately before such share
exchange. However, a Change of Control shall not be deemed to occur solely
because 25% or more of the then outstanding Voting Securities is acquired by
(1) a corporation which immediately prior to such acquisition is owned
directly or indirectly by the Company's shareholders in the same proportion
as their ownership of stock in the Company immediately prior to such
acquisition or (2) any or all of Richard D. Sanford, Sprint Investments, S.A.
(an affiliate of Christopher T.G. Fish), TDH II Limited, Financo Investors
Fund, L.P. (an affiliate of Arnold S. Hoffman).
The Board of Directors believes that granting the Committee the
authority to cause the acceleration of the exercisability of outstanding
Stock Options, the lapse of restrictions applicable to Restricted Stock and
the elimination of conditions applicable to Long Term Performance Awards,
Performance Shares and Performance Units upon the occurrence of an event
constituting a Change in Control will help to preserve the benefits of the
options granted under the Incentive Plan in the event of a Change in Control.
Such provisions may increase the cost to a third party of acquiring control
of the Company (whether pursuant to a friendly or hostile transaction) by
reason of the immediate expense it would be obligated to incur upon a Change
of Control.
The Incentive Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. The Incentive Plan states that with
respect to any payments not yet made to a participant by the Company, nothing
contained in the Incentive Plan gives any participant any rights that are
greater than those of a general creditor of the Company.
The foregoing discussion, as it relates to certain federal income tax
consequences of the Incentive Plan, does not purport to address all of the
tax consequences that may be applicable to any particular participant or to
the Company. In addition, such discussion does not address foreign, state,
or local taxes, nor does it address federal taxes other than federal income
tax. Such discussion is based upon applicable statutes, regulations, case
law, administrative interpretations and judicial decisions in effect as of
the date of this Proxy Statement.
On April 28, 1995, the closing sale price of a share of Common Stock,
as reported on the Nasdaq National Market, was $9.625.
The affirmative vote of the majority of shares present in person or
represented by proxy at the Meeting and entitled to vote on the proposed
approval of the Incentive Plan is required to approve the adoption of the
Incentive Plan. If such approval is not received, the Incentive Plan will
not become effective.
The Board of Directors recommends a vote FOR Proposal 2 to approve the
adoption of the 1995 Long-Term Incentive Plan.
<PAGE>
3. PROPOSED APPROVAL OF THE ADOPTION OF THE
1995 EMPLOYEE STOCK PURCHASE PLAN
Overview
--------
The Board believes that the granting of rights to purchase the
Company's Common Stock, at less than the publicly-traded price, to a broad
employee base is an effective method of recruiting and retaining valuable
personnel and maintaining employee continuity. Such purchase rights also serve
to provide financial incentives and further strengthen the identity of
interests between the employees and the Company. On April 22, 1995, the Board
adopted the 1995 Employee Stock Purchase Plan (the "ESP Plan"), subject to
shareholder approval. A copy of the ESP Plan is included herein as Appendix
"B," and the description of the principal features of the ESP Plan is
qualified in its entirety by reference thereto. A maximum of 500,000 shares
of Common Stock may be sold to participants pursuant to the ESP Plan, if this
Proposal No. 3 is approved by the Company's shareholders. The shares of
Common Stock to be sold pursuant to the ESP Plan may either be authorized and
unissued shares, treasury shares, or shares purchased from the Company's
shareholders. Directors and executive officers of the Company are not
entitled to participate in the ESP Plan.
Administration of the ESP Plan
------------------------------
The ESP Plan is administered by the Compensation and Stock Option
Committee of the Board, which has the sole authority to make, administer and
interpret all rules and regulations that it deems necessary to fulfill its
obligations thereunder. The members of the Committee are not eligible to
purchase stock under the ESP Plan.
Terms of the ESP Plan
---------------------
The ESP Plan gives qualifying employees of the Company and any
majority-owned subsidiaries designated by the Committee the non-transferable
right to purchase full shares of the Company's Common Stock through payroll
deductions. Generally all full-time employees other than directors or
executive officers of the Company will be eligible to participate as long as
the employee has completed 180 days of service. At March 31, 1995, the
Company employed approximately 1,134 such employees. Payroll withholding
commences on July 1, 1995 or such later date as determined by the Committee
or the Board. For persons attaining eligibility after the initial
commencement date, payroll withholding commences on the first day of the next
semi-annual period (e.g. January 1 or July 1) which is more than 30 days
after completing and delivering required withholding authorization forms.
Payroll withholding in any year is limited to the lesser of $10,000 or 10% of
a participant's annual compensation.
Purchases of Common Stock under the Plan take place on the last day of
each six-month period ending on June 30 or December 31 ("Offering Periods").
The purchase price will be set at 90% of the closing price of the Company's
Common Stock on either the first day or the last day of each Offering Period,
whichever yields the lower market price. On each purchase date, each
participant purchases that number of shares of Common Stock equal to the
amount of payroll withheld for the participant's account divided by the
purchase price, rounded down to the nearest whole number. Any excess payroll
withheld is carried over to the next Offering Period.
The ESP Plan contains overall limitations under which the total number
of shares of Common Stock acquired under the Plan by all employees in any
calendar year may not exceed 150,000 shares. In the event this limitation
would be exceeded, the excess will be pro-rated among all participants
purchasing shares under the ESP Plan during the relevant year and their
purchases will be reduced accordingly. Further, on an individual basis, a
participant is disqualified from participation in the ESP Plan to the extent
that, after a purchase under the ESP Plan, he or she would own shares of any
class of stock representing 5% or more of the total combined voting power or
value of all classes of stock of the Company or any subsidiary of the
Company. Similarly, no purchases would be permitted under the ESP Plan to
the extent that such purchases would result in a participant accruing, during
each calendar year, an aggregate fair market value of Common Stock in excess
of $25,000.
The Board may generally amend, suspend or terminate the Plan at any
time. The Committee is authorized to change the discount from market price
at which shares may be purchased under the Plan (up to a maximum discount of
15%) and to change the maximum level of purchases permitted by each
participant under the Plan. No amendment, suspension or termination will be
made which would adversely affect the rights of a participant during the
current Offering Period, without the participant's consent. Without
shareholder approval, the Board may not effect any amendment to the Plan
which would increase the maximum number of shares that may be issued under
the Plan, amend the requirements as to the class of employees eligible to
purchase Common Stock under the Plan, or permit the members of the Committee
to purchase Common Stock under the Plan.
Tax Effects of Plan Participation
---------------------------------
The following summary discussion addresses certain federal income tax
consequences of the ESP Plan. This discussion does not purport to address
all of the tax consequences that may be applicable to any particular
participant or to the Company. In addition, this discussion does not address
foreign, state, or local taxes, nor does it address federal taxes other than
federal income tax. This discussion is based upon applicable statutes,
regulations, case law, administrative interpretations and judicial decisions
in effect as of the date of this Proxy Statement.
A participant in the ESP Plan will not be subject to federal income
tax when he or she is granted the right or option to purchase the Company's
Common Stock. Subject to meeting the employment and holding period
requirements discussed below, a participant will not be subject to tax when
he purchases Common Stock under the ESP Plan. Upon a sale or transfer in a
taxable transaction, any resultant gain will be subject to ordinary income
tax to the extent of the purchase discount attributable to such shares, and
will be subject to long-term capital gains treatment to the extent of any
additional gains.
In general, the tax treatment discussed in the preceding paragraph is
not available if the participant sells or otherwise disposes of Common Stock
acquired under the ESP Plan within two years from the commencement of the
Offering Period in which such shares were purchased, or within one year from
the date the stock was transferred to the participant. Further, as required
by the ESP Plan, the participant must be an employee of the Company or of a
subsidiary of the Company at all times beginning at the commencement of a
particular Offering Period and ending on the day which is three months before
the end of such Offering Period, when the participant purchases the Company's
Common Stock under the ESP Plan. Any discretionary deviation from this Plan
rule may thereby be treated as a disqualifying disposition under the Code.
Generally, the Company is not entitled to a compensation deduction at
the time a participant elects to participate in the ESP Plan or at the time
of the purchase of the Company's Common Stock pursuant to the ESP Plan.
However, if there is a disqualifying disposition of the Company's Common
Stock, the Company will be entitled to deduct, in that year of the
disqualifying distribution, an amount equal to the compensation income
recognized by the participant.
On April 28, 1995, the closing sale price of a share of Common Stock,
as reported on the Nasdaq National Market, was $9.625.
The affirmative vote of a majority of the votes cast at the Meeting on
this Proposal 3 is required to approve the adoption of the ESP Plan. If such
approval is not received, the ESP Plan will not become effective.
The Board of Directors recommends a vote FOR Proposal 3 to approve the
adoption of the 1995 Employee Stock Purchase Plan.
<PAGE>
4. RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the Company's present independent
public accountants, Price Waterhouse LLP, for the fiscal year ending February
3, 1996. This appointment will be submitted to the shareholders for
ratification at the Meeting.
The submission of the appointment of Price Waterhouse LLP is not
required by law or by the By-laws of the Company. The Board of Directors is
nevertheless submitting it to the shareholders to ascertain their views. If
the shareholders do not ratify the appointment, the selection of other
independent public accountants will be considered by the Board of Directors.
If Price Waterhouse LLP shall decline to accept or become incapable of
accepting its appointment, or if its appointment is otherwise discontinued,
the Board of Directors will appoint other independent public accountants.
Representatives of Price Waterhouse LLP are expected to be present at
the Meeting to respond to appropriate questions and will have the opportunity
to make a statement if they so desire.
OTHER BUSINESS
The Company knows of no business which will be presented at the
Meeting other than that set forth in this Proxy Statement and Notice of the
Annual Meeting. However, if other matters should properly come before the
Meeting, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their best judgment on such matters.
EXPENSES OF SOLICITATION
This solicitation of proxies is being made on behalf of the Board of
Directors. All expenses in connection therewith will be paid by the Company.
Request will be made of brokerage houses and other custodians, nominees and
fiduciaries to forward the solicitation material, at the expense of the
Company, to the beneficial owners of stock held of record by such persons.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next Annual
Meeting of Shareholders of the Company must be received by the Company at its
executive offices at 411 Eagleview Boulevard, Exton, PA 19341, on or before
January 15, 1996, to be included in the Company's Proxy Statement and Form of
Proxy for the 1996 Annual Meeting.
THE COMPANY WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE
EXCEPT FOR EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE
FISCAL YEAR ENDED JANUARY 28, 1995. REQUESTS SHOULD BE DIRECTED TO W. EVELYN
WALKER, V.P. INVESTOR RELATIONS, INTELLIGENT ELECTRONICS, INC., 411 EAGLEVIEW
BOULEVARD, EXTON, PA 19341.
BY ORDER OF THE BOARD OF DIRECTORS,
Stephanie D. Cohen
Secretary
DATE: May 12, 1995
<PAGE>
GRAPHIC MATERIAL CROSS-REFERENCE PAGE
A stock performance graph comparing the performance for the Company's Common
Stock with the Standard & Poor's Mid-Cap 400 Composite Stock Price Index (the
"S&P Mid-Cap 400") and a peer group index by measuring the changes in common
stock price from January 31, 1990 through January 28, 1995, plus assumed
reinvested dividends. Figures indicating the cumulative total return for the
Company's Common Stock, the S&P Mid-Cap 400 and the peer group index are
shown on page 8.
<PAGE>
INTELLIGENT ELECTRONICS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Shareholders - June 8, 1995
The undersigned shareholder of INTELLIGENT ELECTRONICS, INC. (the
"Company"), revoking all previous proxies, hereby appoints STEPHANIE D. COHEN
and EDWARD A. MELTZER, and each of them acting individually, as the attorney
and proxy of the undersigned, with full power of substitution, to vote all
shares of stock of the Company which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Shareholders of the
Company, to be held at the Four Seasons Hotel, One Logan Square, Philadelphia,
Pennsylvania, 19103, on June 8, 1995 at 9:00 a.m., and at any adjournment or
postponement thereof; provided that said proxies are authorized and directed
to vote as indicated with respect to the following matters:
1. To elect three directors for
a term of three years expiring WITHHOLD
at the 1998 Annual Meeting FOR AUTHORITY
Barry M. Abelson [ ] [ ]
William L. Rulon-Miller [ ] [ ]
William E. Johnson [ ] [ ]
2. To consider and vote upon
a proposal to approve the
adoption of the 1995 Long-Term FOR AGAINST ABSTAIN
Incentive Plan
[ ] [ ] [ ]
3. To consider and vote upon
a proposal to approve the
adoption of the 1995 Employee FOR AGAINST ABSTAIN
Stock Purchase Plan
[ ] [ ] [ ]
4. To ratify the appointment
of Price Waterhouse LLP as the
Company's independent public
accountants for the fiscal year FOR AGAINST ABSTAIN
ending February 3, 1996.
[ ] [ ] [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" ELECTION OF THE NOMINEES
FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF, "FOR" APPROVAL OF THE ADOPTION
OF THE 1995 LONG-TERM INCENTIVE PLAN, "FOR" APPROVAL OF THE ADOPTION OF THE
1995 EMPLOYEE STOCK PURCHASE PLAN, AND "FOR" RATIFICATION OF THE APPOINTMENT
OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE FISCAL YEAR ENDING FEBRUARY 3, 1996. THIS PROXY ALSO DELEGATES DIS-
CRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT.
Dated: _____________________, 1995
_______________________________________
Signature of Shareholder
_______________________________________
Signature of Shareholder
NOTE: PLEASE SIGN THIS PROXY EXACTLY AS NAME(S) APPEAR ON YOUR STOCK
CERTIFICATE. WHEN SIGNING AS ATTORNEY-IN-FACT, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE ADD YOUR TITLE AS SUCH, AND IF SIGNER IS A
CORPORATION, PLEASE SIGN WITH FULL CORPORATE NAME BY A DULY AUTHORIZED
OFFICER OR OFFICERS AND AFFIX THE CORPORATE SEAL. WHERE STOCK IS ISSUED IN
THE NAME OF TWO (2) OR MORE PERSONS, ALL SUCH PERSONS SHOULD SIGN.
APPENDIX A
----------
INTELLIGENT ELECTRONICS, INC.
1995 LONG-TERM INCENTIVE PLAN
-----------------------------
SECTION 1. Purpose; Definitions. The purpose of the
Intelligent Electronics, Inc. 1995 Long-Term Incentive Plan (the "Plan") is
to offer certain employees and directors of Intelligent Electronics, Inc., a
Pennsylvania corporation (the "Corporation") and its subsidiaries, equity
interests in the Corporation, options to acquire equity interests in the
Corporation, and other performance-based incentive awards, thereby
attracting, retaining and motivating such persons, and strengthening the
mutuality of interests between such persons and the Corporation's
shareholders.
For purposes of the Plan, the following initially capitalized words
and phrases shall be defined as set forth below, unless the context clearly
requires a different meaning:
(a) "Affiliate" means, with respect to a person or entity, a
person that directly or indirectly controls, or is controlled by, or is under
common control with such person or entity.
(b) "Board" means the Board of Directors of the Corporation,
as constituted from time to time.
(c) "Cause" means a felony conviction of a Participant or the
failure of a Participant to contest prosecution for a felony, or a
Participant's willful misconduct or dishonesty.
(d) "Change of Control" means (i) the acquisition in one or
more transactions by any "Person" (as the term person is used for purposes of
Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of twenty-five percent (25%) or
more of the combined voting power of the Corporation's then outstanding
voting securities (the "Voting Securities"), provided that for purposes of
this clause (i) the Voting Securities acquired directly from the Corporation
by any Person shall be excluded from the determination of such Person's
Beneficial Ownership of Voting Securities (but such Voting Securities shall
be included in the calculation of the total number of Voting Securities then
outstanding); or (ii) approval by shareholders of the Corporation of (A) a
merger, reorganization or consolidation involving the Corporation if the
shareholders of the Corporation immediately before such merger,
reorganization or consolidation do not or will not own directly or indirectly
immediately following such merger, reorganization or consolidation, more than
fifty percent (50%) (or such other percentage ranging from fifty percent
(50%) to and including seventy-five percent (75%), that the Committee may, in
its discretion, specify from time to time in general or with respect to any
particular merger, reorganization or consolidation) of the combined voting
power of the outstanding voting securities of the corporation resulting from
or surviving such merger, reorganization or consolidation in substantially
the same proportion as their ownership of the Voting Securities outstanding
immediately before such merger, reorganization or consolidation) or (B) (1)
a complete liquidation or dissolution of the Corporation or (2) an agreement
for the sale or other disposition of all or substantially all of the assets
of the Corporation; or (3) acceptance by shareholders of the Corporation of
shares in a share exchange if the shareholders of the Corporation immediately
before such share exchange do not or will not own directly or indirectly
immediately following such share exchange more than fifty percent (50%) (or
such other percentage ranging from fifty percent (50%) to and including
seventy-five percent (75%), that the Committee may, in its discretion,
specify from time to time in general or with respect to any particular share
exchange) of the combined voting power of the outstanding voting securities
of the corporation resulting from or surviving such share exchange in
substantially the same proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange. Notwithstanding the
foregoing, a Change of Control shall not be deemed to occur solely because
twenty-five percent (25%) or more of the then outstanding Voting Securities
is acquired by (1) a corporation which immediately prior to such acquisition
is owned directly or indirectly by the shareholders of the Corporation in the
same proportion as their ownership of stock in the Corporation immediately
prior to such acquisition or (2) any or all of Richard D. Sanford, Sprint
Investments, S.A., TDH II Limited or Financo Investors Fund, L.P.
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
(f) "Committee" means the Committee referred to in Section 2
hereof.
(g) "Disability" means permanent and total disability, as
determined under the Corporation's long-term disability program, except that
Disability of an optionee with respect to an Incentive Stock Option shall
occur if the optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which
can be expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve (12) months.
(h) "Disinterested Person" shall have the meaning set forth
in Rule 16b-3(c)(2)(i) promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor definition adopted by the Securities
and Exchange Commission; provided, however, that the Board or the Committee
may, in its sole discretion, determine from time to time whether the rules
and regulations under Section 162(m) of the Code shall apply for purposes of
determining which individuals are "Disinterested Persons" following the
Annual Meeting of Shareholders of the Corporation to be held in 1996.
(i) "Fair Market Value" means, as of any date: (1) the
closing price of the Stock as reported on the principal nationally recognized
stock exchange on which the Stock is traded on such date, or if no Stock
prices are reported on such date, the closing price of the Stock on the next
preceding date on which there were reported Stock prices; or (2) if the Stock
is not listed or admitted to unlisted trading privileges on a nationally
recognized stock exchange, the closing price of the Stock as reported by The
Nasdaq Stock Market on such date, or if no Stock prices are reported on such
date, the closing price of the Stock on the next preceding date on which
there were reported Stock prices; or (3) if the Stock is not listed or
admitted to unlisted trading privileges on a nationally recognized stock
exchange or traded on The Nasdaq Stock Market, then the "Market Price" shall
be determined by the Board acting in its discretion, in accordance with the
standards set forth in Treasury Regulation Section 1.421-4(d)(7).
(j) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
(k) "Long-Term Performance Award" or "Long-Term Award" means
an award made pursuant to Section 8 hereof that is payable in cash and/or
Stock (including Restricted Stock, Performance Shares and Performance Units)
in accordance with the terms of the grant, based on Corporation, business
unit and/or individual performance over a period of at least two years, in
each case as determined by the Committee and as set forth in the grant
letter.
(l) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(m) "Participant" means an employee or director of the
Corporation or a Subsidiary to whom an award is granted pursuant to the Plan.
(n) "Performance Share" means an award made pursuant to
Section 9 hereof of the right to receive Stock at the end of a specified
performance period.
(o) "Performance Unit" means an award made pursuant to
Section 10 hereof of the right to receive cash at the end of a specified
performance period.
(p) "Restricted Stock" means an award of shares of Stock that
is subject to restrictions pursuant to Section 7 hereof.
(q) "Retirement" means termination of the employment of a
Participant with the Corporation, an Affiliate or a Subsidiary other than a
termination effected at the direction of the Corporation (whether or not the
Corporation effects such termination for Cause). With respect to a director
who is not also an employee of the Corporation, Retirement shall occur at
such time as the individual ceases to be a director.
(r) "Rules" means Section 16 of the Exchange Act and the
regulations promulgated thereunder.
(s) "Securities Broker" means a registered securities broker
acceptable to the Corporation who agrees to effect the cashless exercise of
an Option pursuant to Section 5(m) hereof.
(t) "Stock" means the common stock, $.01 par value per share,
of the Corporation, subject to substitution or adjustment as provided in
Section 3(d) hereof.
(u) "Stock Appreciation Right" means the right, pursuant to
an award granted under Section 6 hereof, to surrender to the Corporation all
(or a portion) of a Stock Option in exchange for cash and/or shares of stock
in an amount equal to the difference between (i) the Fair Market Value, as of
the date such Stock Option (or such portion thereof) is surrendered, of the
shares of Stock covered by such Stock Option (or such portion thereof) and
(ii) the aggregate exercise price of such Stock Option (or such portion
thereof).
(v) "Stock Option" or "Option" means any option to purchase
shares of Stock (including Restricted Stock, if the Committee so determines)
granted pursuant to Section 5 hereof.
(w) "Subsidiary" means, in respect of the Corporation, a
subsidiary corporation, whether now or hereafter existing, as defined in
Sections 424(f) and (g) of the Code.
SECTION 2. Administration. The Plan shall be administered by
a Committee of not less than two members of the Board who are each
Disinterested Persons and who shall be appointed by, and serve at the
pleasure of, the Board.
The Committee shall have full authority to grant to eligible
persons under Section 4: (i) Stock Options, (ii) Stock Appreciation Rights,
(iii) Restricted Stock, (iv) Long-Term Performance Awards, (v) Performance
Shares and/or (vi) Performance Units. In particular, the Committee shall
have the authority:
(a) to select the persons to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Long-Term Performance Awards,
Performance Shares and Performance Units may from time to time be granted
hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Long-Term Performance Awards, Performance Shares and Performance
Units, or any combination thereof, are to be granted hereunder;
(c) to determine the number of shares of Stock, if any, to be
covered by each such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, including, but
not limited to, the share price and any restriction or limitation, any
vesting provisions, or any vesting acceleration or forfeiture waiver
regarding any Stock Option or other award and/or the shares of Stock relating
thereto, or the length of the period following termination of employment of
any Participant during which any Stock Option or Stock Appreciation Right may
be exercised (which, in the case of an Incentive Stock Option, shall be no
longer than one year in the case of the termination of employment of a
Participant by reason of death or Disability, or three months in the case of
the termination of employment of a Participant for any reason other than
death or Disability), based on such factors as the Committee shall determine,
in its sole discretion;
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or stock, including Restricted Stock under
Section 5(l);
(f) to determine whether and under what circumstances a Stock
Option may be exercised without a payment of cash under Section 5(m); and
(g) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
the Plan may be deferred either automatically or at the election of the
Participant.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); to amend the terms of any agreement relating to
any award issued under the Plan; and to otherwise supervise the
administration of the Plan. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any award granted
in the manner and to the extent it shall deem necessary to carry out the
intent of the Plan.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Corporation
and Participants. No member of the Committee shall be liable for any good
faith determination, act or failure to act in connection with the Plan or any
award made under the Plan.
SECTION 3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. The stock to be subject or
related to awards under the Plan shall be shares of Stock and may be either
authorized and unissued shares of Stock or shares of Stock held in the
treasury of the Corporation. The maximum number of shares of Stock that may
be the subject of awards under the Plan is Five Million (5,000,000) and the
Corporation shall reserve for the purposes of the Plan, out of its authorized
and unissued shares of Stock or out of shares of Stock held in its treasury,
or partly out of each, such number of shares.
Notwithstanding the foregoing, no individual shall receive, over
the term of the Plan, awards for more than an aggregate of 30% of the shares
of Stock authorized for grant under the Plan.
(b) Computation of Stock Available for the Plan. For the
purpose of computing the total number of shares of Stock available under the
Plan at any time during which the Plan is in effect, there shall be debited
against the total number of shares of Stock determined to be available
pursuant to paragraphs (a) and (c) of this Section 3 the maximum number of
shares of Stock subject to issuance upon exercise of Options or other stock
based awards made under the Plan.
(c) Effect of the Expiration or Termination of Awards. If
and to the extent that an award made under the Plan expires, terminates or is
canceled or forfeited for any reason without having been exercised in full,
the shares of Stock associated with the expired, terminated, canceled or
forfeited portion of the award shall again become available for award under
the Plan. Notwithstanding anything contained herein, the number of shares of
Stock available for awards at any time under the Plan shall be reduced to
such lesser number as may be required pursuant to the methods of calculation
necessary so that the exemptions provided pursuant to Rule 16b-3 under the
Exchange Act will continue to be available for transactions involving all
current and future awards. In addition, during the period that any award
remains outstanding under the Plan, the Committee may make good faith
adjustments with respect to the number of shares of Stock attributable to
such awards for purposes of calculating the maximum number of shares
available for the granting of future awards under the Plan, provided that
following such adjustments the exemptions provided pursuant to Rule 16b-3
under the Exchange Act will continue to be available for transactions
involving all current and future awards.
(d) Other Adjustment. In the event of any merger,
reorganization, consolidation, recapitalization, Stock dividend, or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number, type and issuer of the
securities reserved for issuance under the Plan, in the number and option
price of securities subject to outstanding Options granted under the Plan and
in the number and price of securities to other awards made under the Plan, as
may be determined to be appropriate by the Committee in its sole discretion,
provided that the number of securities subject to any award shall always be
a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Corporation upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility. Officers and other employees of the
Corporation or its Subsidiaries are eligible to be granted awards under the
Plan. Directors who are not employees of the Corporation or a Subsidiary are
eligible to be granted awards under the Plan, but are not eligible to be
granted Incentive Stock Options.
SECTION 5. Stock Options. Stock Options granted under the Plan
may be of two types: (i) Incentive Stock Options or (ii) Non-Qualified Stock
Options. Stock Options may be granted alone, in addition to or in tandem
with other awards granted under the Plan. Any Stock Option granted under the
Plan shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee
eligible under Section 4, Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify
as an Incentive Stock Option, it shall constitute a separate Non-Qualified
Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(a) Option Price. The exercise price per share of Stock
purchasable under a Non-Qualified Stock Option shall be determined by the
Committee; provided, however, that if the Board or the Committee has
determined to comply with the rules and regulations under Section 162(m) of
the Code, the exercise price for any individual who is or (as of the time of
grant) can be reasonably anticipated to be subject to the provisions of
Section 162(m) of the Code shall not be less than the Fair Market Value at
the time of grant. The exercise price per share of Stock purchasable under
an Incentive Stock Option shall be 100% of the Fair Market Value of the Stock
on the date of the grant. However, any Incentive Stock Option granted to any
optionee who, at the time the Option is granted, owns more than 10% of the
voting power of all classes of stock of the Corporation or of a Subsidiary,
shall have an exercise price per share of not less than 110% of Fair Market
Value per share on the date of the grant.
(b) Option Term. The term of each Stock Option shall be
fixed by the Committee, but no Stock Option shall be exercisable more than
ten years after the date the Option is granted. However, any Option granted
to any optionee who, at the time the Option is granted, owns more than 10% of
the voting power of all classes of stock of the Corporation or of a
Subsidiary may not have a term of more than five years. No Option may be
exercised by any person after expiration of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee at grant; provided, however, that, except as
otherwise provided herein, unless otherwise determined by the Committee at
grant, no Stock Option granted to a person who is subject to Section 16 of
the Exchange Act (a "Section 16 person") shall be exercisable during the six-
month period following the date of the grant of the Option. If the Committee
provides, in its discretion, that any Stock Option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time at or after grant, in whole or in part, based on such factors as the
Committee shall determine, in its sole discretion.
(d) Method of Exercise. Subject to the exercise provisions
under Section 5(c), Stock Options may be exercised in whole or in part at any
time and from time to time during the term of the Option, by giving written
notice of exercise to the Corporation specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by certified or bank check, or such other instrument
as the Committee may accept. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part of the exercise
price of a Stock Option may be made in the form of unrestricted Stock based
on the Fair Market Value of the Stock on the date the Option is exercised;
provided, however, that, in the case of an Incentive Stock Option, the right
to make a payment in the form of already owned shares of Stock may be
authorized only at the time the Option is granted.
The Committee, in its sole discretion, may at the time of grant or
such later time as it determines, permit payment of a Stock Option exercise
price of a Non-Qualified Stock Option to be made in whole or in part in the
form of Restricted Stock based on the Fair Market Value of the Stock on the
date the Option is exercised (computed without regard to the restrictions
applicable to the Restricted Stock); provided, however, that in the case of
an Incentive Stock Option, the right to make a payment in the form of
Restricted Stock may be authorized only at the time the Option is granted.
If such payment is permitted, then Stock received upon the exercise of the
Option may be subject to the same forfeiture restrictions as the Restricted
Stock used to make the payment, unless otherwise determined by the Committee,
in its sole discretion, at or after grant.
No shares of Stock shall be issued upon exercise of an Option until
full payment therefor has been made. An optionee shall generally have the
right to dividends and other rights of a shareholder with respect to shares
of Stock subject to the Option when the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given the
representation described in Section 13(a) hereof.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order, as
defined in the Code or Title I of the Employee Retirement Income Security
Act, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee or, in the event of his Disability, by his
personal representative.
(f) Termination by Reason of Death. Subject to Section 5(j),
if an optionee's service with the Corporation or any Subsidiary terminates by
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable or on such accelerated basis as the
Committee may determine at or after grant, by the legal representative of the
estate or by the legatee of the optionee under the will of the optionee, for
a period of expiring (1) at such time as may be specified by the Committee at
or after the time of grant, or (2) if not specified by the Committee, then
one year from the date of death, or (3) if sooner than the applicable period
specified under (1) or (2) above, then upon the expiration of the stated term
of such Stock Option.
(g) Termination by Reason of Disability. Subject to
Section 5(j), if an optionee's service with the Corporation or any Subsidiary
terminates by reason of Disability, any Stock Option held by such optionee
may thereafter be exercised by the optionee or his personal representative,
to the extent it was exercisable at the time of termination, or on such
accelerated basis as the Committee may determine at or after grant, for a
period expiring (1) at such time as may be specified by the Committee at or
after the time of grant, or (2) if not specified by the Committee, then six
months from the date of termination of service, or (3) if sooner than the
applicable period specified under (1) or (2) above, then upon the expiration
of the stated term of such Stock Option; provided, however, that if the
optionee dies within such period, any unexercised Stock Option held by such
optionee shall, at the sole discretion of the Committee, thereafter be
exercisable to the extent to which it was exercisable at the time of death
for a period of one (1) year from the date of such death (or such other
period as may be specified by the Committee) or until the expiration of the
stated term of such Stock Option, whichever period is shorter.
(h) Termination by Reason of Retirement. Subject to
Section 5(j), if an optionee's service with the Corporation terminates by
reason of Retirement, any Stock Option held by such optionee may thereafter
be exercised by the optionee, to the extent it was exercisable at the time of
such Retirement or on such accelerated basis as the Committee may determine
at or after grant, for a period expiring (1) at such time as may be specified
by the Committee at or after the time of grant, or (2) if not specified by
the Committee, then thirty (30) days from the date of termination of service,
or (3) if sooner than the applicable period specified under (1) or (2) above,
then upon the expiration of the stated term of such Stock Option.
(i) Other Termination. Unless otherwise determined by the
Committee at or after grant, if an optionee's service with the Corporation
terminates for any reason other than death, Disability or Retirement, the
Stock Option shall be exercisable by the optionee for a period expiring (1)
at such time as may be specified by the Committee at or after the time of
grant, or (2) if not specified by the Committee, then on the date of
termination of service in the event the termination occurred for Cause or 30
days from the date of termination of service if the termination occurred for
any reason other than death, Disability, Retirement or Cause, or (3) if
sooner than the applicable period specified under (1) or (2) above, then upon
the expiration of the stated term of such Stock Option.
(j) Change of Control. In the event of a Change of Control,
the Committee may, in its sole discretion, cause all outstanding Stock
Options to immediately become fully exercisable.
(k) Incentive Stock Option Limitations. To the extent
required for "incentive stock option" status under Section 422 of the Code,
the aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the optionee during any calendar year under the Plan and/or any
other plan of the Corporation or any Subsidiary shall not exceed $100,000.
For purposes of applying the foregoing limitation, Incentive Stock Options
shall be taken into account in the order granted.
To the extent (if any) permitted under Section 422 of the Code
without causing an Incentive Stock Option to lose its status as such or to be
deemed to be a new Incentive Stock Option under the modification rules of
Section 424(h) of the Code, and subject to any restrictions imposed by the
Committee, if (i) a participant's service with the Corporation is terminated
by reason of death, Disability or Retirement and (ii) the portion of any
Incentive Stock Option that is otherwise exercisable during the post-
termination period specified under Section 5(f), (g) or (h), applied without
regard to this Section 5(j), is greater than the portion of such Option that
is exercisable as an "incentive stock option" during such post-termination
period under Section 422 after taking the $100,000 limitation into account,
such post-termination period of exercisability shall automatically be
extended (but not beyond the original Option term) to the extent necessary to
permit the optionee to exercise such Incentive Stock Option without violating
the $100,000 limitation.
(l) Cash-out of Option; Settlement of Restricted Stock. On
receipt of written notice to exercise, the Committee may, in its sole
discretion, elect to terminate all or part of the portion of the Option(s)
proposed to be exercised provided that the Corporation pays the optionee an
amount in cash equal to the excess of the Fair Market Value of the Stock
otherwise issuable over the Option price (the "Spread Value") on the
effective date of such cash-out.
In addition, if the option agreement so provides at grant or is
amended after grant and prior to exercise to so provide (with the optionee's
consent), the Committee may require that all or part of the shares to be
issued upon exercise of an Option take the form of Restricted Stock. For
this purpose, such Restricted Stock shall be valued on the date of exercise
on the basis of the Fair Market Value of such Restricted Stock determined
without regard to the forfeiture restrictions involved.
(m) Cashless Exercise. To the extent permitted under the
Rules, and with the consent of the Committee, the Corporation agrees to
cooperate in a "cashless exercise" of an Option. The cashless exercise shall
be effected by the Participant delivering to the Securities Broker
instructions to sell a sufficient number of shares of Stock to cover the
costs and expenses associated therewith.
SECTION
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted under the
Plan and, subject to Section 5(e) hereof, shall be transferable only upon
transfer of the related Stock Option. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant
of such Stock Option. In the case of an Incentive Stock Option, such rights
may be granted only at the time of the grant of such Stock Option.
A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
except that, unless otherwise determined by the Committee, in its sole
discretion at the time of grant, a Stock Appreciation Right granted with
respect to less than the full number of shares covered by a related Stock
Option shall not be reduced until the number of shares covered by an exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with Section 6(b) of the Plan, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b) of the Plan. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Committee, in its
sole discretion, including the following:
(i) Stock Appreciation Rights shall be exercisable only
at such time or times and to the extent that the Stock Options to which they
relate shall be exercisable in accordance with the provisions of Section 5
and this Section 6 of the Plan; provided, however, that any Stock
Appreciation Right granted to Section 16 persons subsequent to the grant of
the related Stock Option shall not be exercisable during the first six months
of its term.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an amount in
cash and/or shares of Stock equal in value to the excess of the Fair Market
Value of one share of Stock over the Option price per share specified in the
related Stock Option, multiplied by the number of shares in respect of which
the Stock Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(iii) Upon the exercise of a Stock Appreciation
Right, the Stock Option or part thereof to which such Stock Appreciation
Right is related, shall be deemed to have been exercised for the purpose of
the limitation set forth in Section 3 of the Plan on the number of shares of
Stock to be issued under the Plan, but only to the extent of the number of
shares issued under the Stock Appreciation Right at the time of exercise
based on the value of the Stock Appreciation Right at such time.
(iv) A Stock Appreciation Right granted in connection
with a Stock Option may be exercised only if and when the market price of the
Stock subject to the Stock Option exceeds the exercise price of such Stock
Option.
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued
either alone or in addition to other awards granted under the Plan. The
Committee shall determine the persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares to be
awarded, the price (if any) to be paid by the recipient of Restricted Stock,
the time or times within which such awards may be subject to forfeiture, and
all other conditions of the awards.
The Committee may condition the vesting of Restricted Stock upon
the attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion, at the time of the award.
The provisions of Restricted Stock awards need not be the same with
respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the
award and has delivered a fully executed copy thereof to the Corporation, and
has otherwise complied with the applicable terms and conditions of such
award. The purchase price for shares of Restricted Stock may be zero.
Each Participant receiving a Restricted Stock award shall be issued
a stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such Participant, and shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Intelligent
Electronics, Inc. 1995 Long-Term Incentive Plan and an
Agreement entered into between the registered owner and
Intelligent Electronics, Inc. Copies of such Plan and
Agreement are on file in the principal corporate offices
of Intelligent Electronics, Inc."
The Committee shall require that the stock certificates evidencing
shares of Restricted Stock be held in custody by the Corporation until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the Participant shall have delivered to the
Corporation a stock power, endorsed in blank, relating to the Stock covered
by such award.
(c) Restrictions and Conditions. The shares of Restricted
Stock awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) During a period set by the Committee commencing with
the date of such award (the "Restriction Period"), the Participant shall not
be permitted to sell, transfer, pledge, assign or otherwise encumber shares
of Restricted Stock awarded under the Plan. The Committee, in its sole
discretion, may provide for the lapse of such restrictions in installments
and may accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the Committee
may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and
Section 7(c)(i), the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Corporation,
including the right to vote the shares, and the right to receive any cash
dividends. The Committee, in its sole discretion, as determined at the time
of award, may permit or require the payment of cash dividends to be deferred
and, if the Committee so determines, reinvested in additional shares of
Restricted Stock to the extent shares are available under Section 3 of the
Plan.
(iii) Subject to the applicable provisions of the
award agreement and this Section 7, upon termination of a Participant's
service with the Corporation for reasons other than death or Disability
during the Restriction Period, all shares of Restricted Stock still subject
to restriction shall be forfeited by the Participant. Subject to the
provisions of the Plan, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may waive such
restrictions, in whole or in part, at any time, based on such factors as the
Committee shall deem appropriate in its sole discretion. Upon the death or
Disability of a Participant during the Restriction Period, restrictions will
lapse with respect to a percentage of the Restricted Stock award granted to
the Participant that is equal to the percentage of the Restriction Period
that has elapsed as of the date of death or the date on which such Disability
commenced (as determined by the Committee in its sole discretion), and a
stock certificate or stock certificates representing such shares of Stock
shall be issued and delivered to the Participant or the Participant's estate,
as the case may be.
(iv) In the event of hardship or other special
circumstances of a Participant whose service with the Corporation is
involuntarily terminated (other than for Cause), the Committee may, in its
sole discretion, waive in whole or in part any or all remaining restrictions
with respect to such Participant's shares of Restricted Stock, based on such
factors as the Committee may deem appropriate.
(v) If and when the Restriction Period expires without
a prior forfeiture of the Restricted Stock subject to such Restriction
Period, the certificates for such shares shall be promptly delivered by the
Corporation to the Participant.
(vi) In the event of a Change of Control, the Committee
in its sole discretion, cause all Restricted Stock remaining subject to
forfeiture to immediately cease to be subject to forfeiture and a stock
certificate or stock certificates representing such shares of Stock to be
issued and delivered to the Participant.
SECTION 8. Long Term Performance Awards.
(a) Awards and Administration. Long Term Performance Awards
may be awarded either alone or in addition to other awards granted under the
Plan. Prior to award of a Long Term Performance Award, the Committee shall
determine the nature, length and starting date of the performance period (the
"performance period") for each Long Term Performance Award, which shall be at
least two years (subject to Section 11 below). Performance periods may
overlap and Participants may participate simultaneously with respect to Long
Term Performance Awards that are subject to different performance periods
and/or different performance factors and criteria. Prior to award of a Long
Term Performance Award, the Committee shall determine the performance
objectives to be used in valuing Long Term Performance Awards and determine
the extent to which such Long Term Performance Awards have been earned.
Performance objectives may vary from Participant to Participant and between
groups of Participants and shall be based upon such Corporation, business
unit and/or individual performance factors and criteria as the Committee may
deem appropriate, including, but not limited to, earnings per share or return
on equity, as approved by the Shareholders of the Corporation. If the Board
or the Committee has determined to comply with the rules and regulations
under Section 162(m) of the Code, the Committee shall determine, in its sole
discretion, the extent to which the performance objectives for any Long Term
Performance Award should be disclosed to and approved by the shareholders of
the Corporation and otherwise comply with such rules and regulations.
At the beginning of each performance period, the Committee shall
determine for each Long Term Performance Award subject to such performance
period the range of dollar values or number of shares of Stock to be awarded
to the Participant at the end of the performance period if and to the extent
that the relevant measure(s) of performance for such Long Term Performance
Award is (are) met; provided, however, that no Participant shall be awarded
a Long Term Performance Award with a dollar value in excess of One Million
Dollars ($1,000,000) for the performance period to which the Long Term
Performance Award relates. Such dollar values or number of shares of Stock
may be fixed or may vary in accordance with such performance and/or other
criteria as may be specified by the Committee, in its sole discretion.
(b) Adjustment of Awards. In the event of special or unusual
events or circumstances affecting the application of one or more performance
objectives to a Long Term Performance Award, the Committee may revise the
performance objectives and/or underlying factors and criteria applicable to
the Long Term Performance Awards affected, to the extent deemed appropriate
by the Committee, in its sole discretion, to avoid unintended windfalls or
hardship.
(c) Termination of Service. Unless otherwise provided in the
applicable award agreement(s), if a Participant terminates service with the
Corporation during a performance period because of death, Disability or
Retirement, such Participant (or his estate) shall be entitled to a payment
with respect to each outstanding Long Term Performance Award at the end of
the applicable performance period:
(i) based, to the extent relevant under the terms of the
award, upon the Participant's performance for the portion of such performance
period ending on the date of termination and the performance of the
applicable business unit(s) for the entire performance period, and
(ii) pro-rated, where deemed appropriate by the
Committee, for the portion of the performance period during which the
Participant was employed by the Corporation, all as determined by the
Committee, in its sole discretion.
However, the Committee may provide for an earlier payment in
settlement of such award in such amount and under such terms and conditions
as the Committee deems appropriate, in its sole discretion.
Except as otherwise determined by the Committee, if a Participant
terminates service with the Corporation during a performance period for any
other reason, then such Participant shall not be entitled to any payment with
respect to the Long Term Performance Awards subject to such performance
period, unless the Committee shall otherwise determine, in its sole
discretion.
In the event of a Change of Control, the Committee may, in its sole
discretion, cause all conditions applicable to a Long Term Performance Award
to immediately terminate and a stock certificate or stock certificates
representing shares of Stock subject to such award, or cash, as the case may
be, to be issued and/or delivered to the Participant.
(d) Form of Payment. The earned portion of a Long Term
Performance Award may be paid currently or on a deferred basis, together with
such interest or earnings equivalent as may be determined by the Committee,
in its sole discretion. Payment shall be made in the form of cash or whole
shares of Stock, including Restricted Stock, either in a lump sum payment or
in annual installments commencing as soon as practicable after the end of the
relevant performance period, all as the Committee shall determine at or after
grant. If and to the extent a Long Term Performance Award is payable in
Stock and the full amount of such value is not paid in Stock, then the shares
of Stock representing the portion of the value of the Long Term Performance
Award not paid in Stock shall again become available for award under the
Plan, subject to Section 3(c). Prior to any payment, the Committee shall
certify that all of the performance goals or other material terms of the
award have been met.
SECTION 9. Performance Shares.
(a) Awards and Administration. The Committee shall determine
the persons to whom and the time or times at which Performance Shares shall
be awarded, the number of Performance Shares to be awarded to any such
person, the duration of the period (the "performance period") during which,
and the conditions under which, receipt of the shares of Stock will be
deferred, and the other terms and conditions of the award in addition to
those set forth below.
The Committee may condition the receipt of shares of Stock pursuant
to a Performance Share award upon the attainment of specified performance
goals or such other factors or criteria as the Committee shall determine, in
its sole discretion.
The provisions of Performance Share awards need not be the same
with respect to each Participant, and such awards to individual Participants
need not be the same in subsequent years.
(b) Terms and Conditions. Performance Shares awarded
pursuant to this Section 9 shall be subject to the following terms and
conditions and such other terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem desirable:
(i) Conditions. The Committee, in its sole discretion,
shall specify the performance period during which, and the conditions under
which, the receipt of shares of Stock covered by the Performance Share award
will be deferred.
(ii) Stock Certificate. At the expiration of the
performance period, if the Committee, in its sole discretion, determines that
the conditions specified in the Performance Share agreement have been
satisfied, a stock certificate or stock certificates representing the number
of shares of Stock covered by the Performance Share award shall be issued and
delivered to the Participant. A Participant shall not be deemed to be the
holder of Stock, or to have the rights of a holder of Stock, with respect to
the Performance Shares unless and until a stock certificate or stock
certificates representing such shares of Stock are issued to such
Participant.
(iii) Death, Disability or Retirement. Subject to
the provisions of the Plan, if a Participant terminates service with the
Corporation during a performance period because of death, Disability or
Retirement, such Participant (or his estate) shall be entitled to receive, at
the expiration of the performance period, a percentage of Performance Shares
that is equal to the percentage of the performance period that had elapsed as
of the date of termination, provided that the Committee, in its sole
discretion, determines that the conditions specified in the Performance Share
agreement have been satisfied. In such event, a stock certificate or stock
certificates representing such shares of Stock shall be issued and delivered
to the Participant or the Participant's estate, as the case may be.
(iv) Termination of Service. Unless otherwise determined
by the Committee at the time of grant, the Performance Shares will be
forfeited upon a termination of service during the performance period for any
reason other than death, Disability or Retirement.
(v) Change of Control. In the event of a Change of
Control, the Committee may, in its sole discretion, cause all conditions
applicable to the Performance Shares to immediately terminate and a stock
certificate or stock certificates representing shares of Stock subject to the
Stock award to be issued and delivered to the Participant.
SECTION 10. Performance Units.
(a) Awards and Administration. The Committee shall determine
the persons to whom and the time or times at which Performance Units shall be
awarded, the number of Performance Units to be awarded to any such person,
the duration of the period (the "performance period") during which, and the
conditions under which, a Participant's right to Performance Units will be
vested, the ability of Participants to defer the receipt of payment of such
Performance Units, and the other terms and conditions of the award in
addition to those set forth below.
A Performance Unit shall have a fixed dollar value.
The Committee may condition the vesting of Performance Units upon
the attainment of specified performance goals or such other factors or
criteria as the Committee shall determine, in its sole discretion.
The provisions of Performance Unit awards need not be the same with
respect to each Participant, and such awards to individual Participants need
not be the same in subsequent years.
to this Section 10 shall be subject to the following terms and
conditions and such other terms and conditions, not inconsistent with the terms
of this Plan, as the Committee shall deem desirable:
(i) Conditions. The Committee, in its sole discretion,
shall specify the performance period during which, and the conditions under
which, the Participant's right to Performance Units will be vested.
(ii) Vesting. At the expiration of the performance
period, the Committee, in its sole discretion, shall determine the extent to
which the performance goals have been achieved, and the percentage of the
Performance Units of each Participant that have vested.
(iii) Death, Disability or Retirement. Subject to
the provisions of this Plan, if a Participant terminates service with the
Corporation during a performance period because of death, Disability or
Retirement, such Participant (or the Participant's estate) shall be entitled
to receive, at the expiration of the performance period, a percentage of
Performance Units that is equal to the percentage of the performance period
that had elapsed as of the date of termination, provided that the Committee,
in its sole discretion, determines that the conditions specified in the
Performance Unit agreement have been satisfied, and payment thereof shall be
made to the Participant or the Participant's estate, as the case may be.
(iv) Termination of Service. Unless otherwise determined
by the Committee at the time of grant, the Performance Units will be
forfeited upon a termination of service during the performance period for any
reason other than death, Disability or Retirement.
(v) Change of Control. In the event of a Change of
Control, the Committee may, in its sole discretion, cause all conditions
applicable to Performance Units to immediately terminate and cash
representing the full amount of such award to be paid to the Participant.
SECTION 11. Amendments and Termination. The Board may amend,
alter or discontinue the Plan at any time and from time to time, but no
amendment, alteration or discontinuation shall be made which would impair the
rights of a Participant with respect to a Stock Option, Stock Appreciation
Right, Restricted Stock, Long Term Performance Award, Performance Share or
Performance Unit which has been granted under the Plan, without the
Participant's consent, or which, without the approval of the Corporation's
shareholders, would:
(a) except as expressly provided in the Plan, increase the
total number of shares of Stock reserved for the purposes of the Plan;
(b) change the persons or class of persons eligible to
participate in the Plan; or
(c) extend the maximum Option term under Section 5(b) of the
Plan.
The Committee may substitute new Stock Options for previously
granted Stock Options, including previously granted Stock Options having
higher exercise prices.
Subject to the above provisions, the Board shall have broad
authority to amend the Plan to take into account changes in applicable tax
laws and accounting rules, as well as other developments. Notwithstanding
the foregoing, no amendment to the Plan may be made by the Board without the
approval of the Corporation's shareholders if such approval would be required
under the Rules in order to ensure that transactions effected under the Plan
are eligible for the benefit of Rule 16b-3.
SECTION 12. Unfunded Status of Plan. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or optionee by the
Corporation, nothing contained herein shall give any such Participant or
optionee any rights that are greater than those of a general creditor of the
Corporation. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or payments in lieu of Stock or with respect
to awards hereunder.
SECTION 13. General Provisions.
(a) The Committee may require each person acquiring Stock or
a Stock based award under the Plan to represent to and agree with the
Corporation in writing that the Participant is acquiring the Stock or Stock
based award for investment purposes and without a view to distribution
thereof and as to such other matters as the Committee believes are
appropriate to ensure compliance with applicable Federal and state securities
laws. The certificate evidencing such award and any securities issued
pursuant thereto may include any legend which the Committee deems appropriate
to reflect any restrictions on transfer and compliance with securities laws.
All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities Act of 1933, as
amended, the Exchange Act, any stock exchange upon which the Stock is then
listed, and any other applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any
employee of the Corporation or a Subsidiary any right to continued employment
with the Corporation or such Subsidiary, nor shall it interfere in any way
with the right of the Corporation or such Subsidiary to terminate the
employment of any of its employees at any time.
(d) No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal income
tax purposes with respect to any award under the Plan, the Participant shall
pay to the Corporation, or make arrangements satisfactory to the Committee
regarding the payment, of any Federal, state or local taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise
determined by the Committee, the minimum required withholding obligations may
be settled with Stock, including Stock that is part of the award that gives
rise to the withholding requirement. The obligations of the Corporation
under the Plan shall be conditional on such payment or arrangements and the
Corporation shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant.
(e) At the time of grant of an award under the Plan, the
Committee may provide that the shares of Stock received as a result of such
grant shall be subject to a right of first refusal, pursuant to which the
Participant shall be required to offer to the Corporation any shares that the
Participant wishes to sell, with the price being the then Fair Market Value
of the Stock, subject to such other terms and conditions as the Committee may
specify at the time of grant.
(f) The reinvestment of dividends in additional Restricted
Stock (or in other types of Plan awards) at the time of any dividend payment
shall only be permissible if sufficient shares of Stock are available under
Section 3 of the Plan for such reinvestment (taking into account then
outstanding Stock Options and other Plan awards).
(g) The Committee shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom any amounts
payable in the event of the Participant's death are to be paid.
(h) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
SECTION 14. Effective Date of Plan. The Plan shall be effective
on the date it is approved by the affirmative vote of the holders of a
majority of the shares of Stock present, or represented, and entitled to vote
on the Plan at a meeting of shareholders; provided, however, that if the Plan
is not so approved, it shall become null and void.
SECTION 15. Term of Plan. No Stock Option, Stock Appreciation
Right, Restricted Stock, Long Term Performance Award, Performance Share or
Performance Unit shall be granted pursuant to the Plan on or after the tenth
(10th) anniversary of the date of shareholder approval of the Plan, but
awards granted prior to such tenth (10th) anniversary may extend beyond that
date.
APPENDIX B
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INTELLIGENT ELECTRONICS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
1. Purpose.
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The Intelligent Electronics, Inc. 1995 Employee Stock Purchase Plan
(the "Plan") is designed to provide all eligible employees of Intelligent
Electronics, Inc., a Pennsylvania corporation (the "Company"), and its
subsidiaries, an opportunity to acquire a proprietary interest in the Company
through the purchase of shares of the Company's common stock (the "Common
Stock"). It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"). The provisions of the Plan will be
construed to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
2. Definitions.
-----------
a. "Board" means the Board of Directors of the Company, as
constituted from time to time.
b. "Committee" means the members of the Board's Compensation
and Stock Option Committee, as constituted from time to time, or such other
committee of the Board as shall have been designated to administer this Plan
and which has at least two members.
c. "Company" means Intelligent Electronics, Inc., a
Pennsylvania Corporation, and any successor in interest to the business of
the Company that agrees to adopt and maintain the Plan.
d. "Compensation" means the Participant's total paid
earnings from the Employer for the Plan Year, prior to adjustment for salary
reduction contributions to a plan described in Code Section 401(k) or to a plan
described in Code Section 125, excluding any portion of such earnings which
represents bonus payments or awards, taxable fringe benefits (such as club
dues, excess life insurance benefits, personal use of automobiles, or
educational reimbursement), incentive awards or commissions.
e. "Employer" means the Company and each of its wholly-owned
subsidiaries, and any other corporation so designated by the Board, 50% or
more of the voting stock of which is owned directly or indirectly by the
Company.
f. "Employee" means any person whose wages and other salary
is required to be reported by the Company on Internal Revenue Service Form W-
2 for federal income tax purposes; provided, however, that the term
"Employee" shall not include any such person who is (i) customarily employed
for not more than 20 hours per week by an Employer, (ii) customarily employed
by an Employer for not more than 5 months in any calendar year, or (iii) an
executive officer or director of the Company.
g. "Leave of Absence" means an absence from active
employment (not involving a retirement, quit, discharge, resignation or
layoff) which is not due to an authorized vacation, and shall include an
absence due to illness, compensable or non-compensable injury, personal
emergency, or approved personal leave of absence.
h. "Market Price" means, as of any date: (1) the closing
price of the Common Stock as reported on the principal nationally recognized
stock exchange on which the Common Stock is traded on such date, or if no
Common Stock prices are reported on such date, the closing price of the
Common Stock on the next preceding date on which there were reported Common
Stock prices; or (2) if the Common Stock is not listed or admitted to
unlisted trading privileges on a nationally recognized stock exchange, the
closing price of the Common Stock as reported by The Nasdaq Stock Market on
such date, or if no Common Stock prices are reported on such date, the
closing price of the Common Stock on the next preceding date on which there
were reported Common Stock prices; or (3) if the Common Stock is not listed
or admitted to unlisted trading privileges on a nationally recognized stock
exchange or traded on The Nasdaq Stock Market, then the "Market Price" shall
be determined by the Board acting in its discretion, in accordance with the
standards set forth in Treasury Regulation Section 1.421-4(d)(7).
i. "Offering" means each offer of Shares during an Offering
Period pursuant to this Plan.
j. "Offering Commencement Date" means July 1, 1995 (or such
later date as may be determined by the Committee or the Board) and each
subsequent January 1 and July 1.
k. "Offering Period" means each six-month period ending on
June 30 and December 31.
l. "Option Price" means, with respect to a particular
Offering Period, an amount equal to Price Percentage of the Market Price
determined on the following dates, whichever date yields the lower Market
Price: (i) the first date of the Offering Period or (ii) the Purchase Date
falling at the end of the Offering Period.
m. "Participant" means an Employee who has agreed to
participate in an Offering and who has met the requirements of paragraphs 3,
4, & 8.
n. "Plan" means this Employee Stock Purchase Plan, as in
effect from time to time.
o. "Plan Year" means a calendar year.
p. "Price Percentage" means that percentage determined by
the Committee or the Board from time to time; provided, however, that the
Price Percentage shall be at least 85%, and further provided, that any change
in the Price Percentage shall take effect no sooner than the next Offering
Commencement Date following the change. Unless and until changed by the
Committee or the Board, the Price Percentage shall be 90%.
q. "Purchase Dates" means the dates on which options under
the Plan are exercised, being December 31, 1995 with respect to the 1995 Plan
Year to the extent an Offering is made during the 1995 Plan Year, and the
June 30 and December 31 of each successive Plan Year to the extent subsequent
Offerings are made under the Plan.
r. "Shares" means the shares of the Company's Common Stock.
3. Eligibility.
-----------
a. Each Employee will be eligible to participate in the Plan
commencing on any Offering Commencement Date, provided such Employee has
completed 180 days of service as of such entry date.
b. For purposes of participation in the Plan, a person on
authorized Leave of Absence will be deemed to be an Employee for the first 90
days of such authorized Leave of Absence and such Employee's employment will
be deemed to have terminated at the close of business on the 90th day of such
Leave of Absence unless such Employee has returned to regular full-time or
part-time employment (as the case may be) prior to the close of business on
such 90th day. Termination by the Company of any Employee's authorized Leave
of Absence, other than termination of such authorized Leave of Absence on
return to full-time or part-time employment, will terminate an Employee's
employment for all purposes of the Plan and will terminate such Employee's
participation in the Plan and right to exercise any option. The Company will
pay to the Participant any balance in his account without interest within 30
days after the date of termination. Notwithstanding the foregoing, an
Employee who is absent by reason of a leave under the provisions of the
Family and Medical Leave Act (FMLA Leave), or who ceases to become an
Employee because of a reduction in hours caused by an intermittent FMLA
Leave, shall continue to be a Participant throughout the FMLA Leave, and
shall terminate participation only if the Employee does not return to work or
resume Employee status at the expiration of the FMLA Leave.
c. Notwithstanding any provisions of the Plan to the
contrary, no Employee will be granted an option:
(1) if, immediately after the grant, such Employee would
own shares, and/or hold outstanding options to purchase shares, possessing 5%
or more of the total combined voting power or value of all classes of stock
of the Company or of any subsidiary of the Company; or
(2) which permits such Employee to purchase Shares under
all employee stock purchase plans of the Company and its subsidiaries to
accrue at a rate that exceeds $25,000 in fair market value of the Shares
(determined at the time such option is granted) for each calendar year in
which such option is outstanding.
4. Commencement of Participation.
-----------------------------
a. An Employee shall become a Participant in the Plan by
completing an authorization for a payroll deduction on a form provided by the
Company and filing it with the Company official designated by the Committee
(the "Administrator"). Such Employee's participation will commence on the
next Offering Commencement Date which is at least 30 days following the date
the form is received by the Administrator. Payroll deductions for a
Participant for each Offering in which the Participant elects to participate
will commence as of the first day of the first payroll period that includes
the Offering Commencement Date and will end on the last day of the payroll
period that includes a Purchase Date, unless sooner terminated by the
Participant as provided in paragraph 9.
5. Offerings.
---------
The Company will make the Offerings to Employees to purchase Shares
under this Plan, during which the amounts received as Compensation by an
Employee will constitute the measure of such Employee's participation in the
Offering.
6. Payroll Deductions.
------------------
a. At the time an Employee files an authorization for
payroll deduction, that Employee will elect to have deductions made from his
pay on paydays during the Offering Period expressed either as a dollar amount
or as a whole percentage of his Compensation that, in either case, (1) does
not exceed the lesser of $10,000 per Plan Year or 10% of his Compensation at
the beginning of such Offering Period, and (2) is at least $10.00 per pay
period. The dollar amount and percentage indicated in clause (1) of the
preceding sentence may be changed from time to time by the Committee or the
Board.
b. All payroll deductions made for a Participant will be
credited to such Participant's account under the Plan. A Participant may not
make separate cash payments into such account.
c. Participants may not change the amount authorized to be
deducted from their Compensation during any Offering Period, except by
withdrawal as provided in paragraph 9.
7. Granting of Option.
------------------
Each Participant participating in any Offering under this Plan will
automatically be granted an option, on the Commencement Date of each Offering
Period, for as many whole Shares as the Participant may be entitled to
purchase with the payroll deductions credited to the Participant's account
during such Offering Period as determined in accordance with Paragraph 8.
8. Exercise of Option.
------------------
a. Subject to the limitations described in the remainder of
this paragraph 8(a), a Participant will be deemed to have exercised on a
Purchase Date such Participant's option to purchase a number of full Shares
determined by dividing the amount in each Participant's account by the Option
Price and rounding down to the nearest whole number. On such Purchase Date,
each Participant's account will be debited by the amount of the purchase.
Notwithstanding any provision to the contrary contained herein, in no event
will all Participants with respect to any Plan Year be permitted to exercise
options exceeding an aggregate of 150,000 Shares (as such number may be
adjusted from time to time by the Board to give effect to the types of
transactions described in paragraph 14) with respect to any such Plan Year.
If the number of Shares related to options to be exercised in any Plan Year
exceeds 150,000, then the number of shares with respect to which each
Participant will be deemed to have exercised will be reduced on a prorated
basis so that the total number of shares for which all Participants will be
deemed to have exercised options will approximate as closely as possible, but
will not exceed, 150,000. No fractional Shares will be issued under the
Plan.
b. Participation or failure to participate in an Offering
will not bar an Employee from participating in any subsequent Offering.
Payroll deductions may be made under each Offering to the extent authorized
by the Employee, subject to the maximum and minimum limitations imposed by
this Plan. Any unused balance in a Participant's account at a Purchase Date
after the exercise of options will be refunded as soon as is practicable,
unless such Employee authorizes payroll deductions for the next Offering in
which case the remaining balance will become the Employee's beginning
balance.
9. Withdrawal.
----------
a. A Participant may withdraw payroll deductions credited to
his account under the Plan at any time by giving written notice to the
Administrator not less than fifteen (15) business days before the next
Purchase Date. The Company will pay to the Participant the balance in his
account within fifteen (15) days after receipt of his notice of withdrawal,
and no further payroll deductions will be made for that Participant during
that Offering.
b. A Participant's withdrawal will not have any effect upon
his eligibility to participate in any succeeding Offerings.
c. If a Participant retires during an Offering, no payroll
deduction will be made from any Compensation owing to him at the time of his
retirement and the balance in his account will be paid to him or, at his
election, be used to purchase Shares as provided in paragraph 8. If a
Participant's employment is terminated for any reason other than death, or if
a Participant becomes an executive officer or director of the Company, no
payroll deduction will be made from any Compensation owing to him at or after
the time of such termination or the time the Participant becomes an executive
officer or director of the Company, respectively, and the Company will pay to
the Participant the balance, if any, in his account within 30 days after
termination of employment or participation.
d. If a Participant dies, the Company will pay the balance
in his account in the same manner as Participant's last paycheck.
10. Interest.
--------
No interest will be credited to any Participant's account
regardless of whether the funds therein are used to exercise options or are
withdrawn, except as otherwise provided by Paragraph 17.
11. Shares.
------
a. The Shares to be sold to Participants under this Plan may
be either authorized and unissued shares of Common Stock, treasury shares or
shares of Common Stock purchased from shareholders of the Company, as
determined by the Committee or the Board from time to time. The maximum
number of shares available for sale under this Plan for all Offerings will be
500,000, subject to adjustment upon changes in capitalization of the Company
as provided in Paragraph 14.
b. None of the rights or privileges of a shareholder of the
Company will exist with respect to shares purchased under this Plan unless
and until certificates representing such shares have been issued and
delivered.
c. Shares to be delivered to a Participant under this Plan
will be registered in the name of the Employee, or if so directed by written
notice to the Company prior to the Offering Commencement Date of the
pertinent Offering, in the names of the Employee and one other person as
joint tenant, with right of survivorship as such Employee may designate, to
the extent permitted by applicable law, or in the name of a registered
broker-dealer.
12. Administration.
--------------
The Plan shall be administered by the Committee. No member of the
Committee will be eligible to purchase Shares under the Plan. The Committee
will be vested with full authority to make, administer, and interpret such
rules and regulations as it deems necessary to administer the Plan, and any
determination, decision, or action of the Committee in connection with the
construction, interpretation, administration, or application of the Plan will
be final, conclusive, and binding upon all Participants and any and all
persons claiming under or through any Participant. If no Committee is so
designated, the Board shall administer the Plan. Any decision or action
permitted hereunder to be made by the Committee may instead be made by the
Board.
13. Transferability.
---------------
Neither payroll deductions credited to a Participant's account nor
any rights with regard to the exercise of an option or to receive Shares
under the Plan may be assigned, transferred, pledged, or otherwise disposed
of in any way by the Participant other than by will or the laws of descent
and distribution. Any such attempt at assignment, transfer, pledge, or other
disposition will be without effect, except that the Company may treat such
act as an election to withdraw funds in accordance with paragraph 9.
14. Changes in Capitalization.
-------------------------
If any option under this Plan is exercised subsequent to any stock
dividend, split up, spin off, recapitalization, merger, consolidation,
exchange of shares, or the like, occurring after such option has been
granted, as a result of which shares of any class will be issued in respect
of the outstanding shares, or shares will be changed into the same or a
different number of the same or another class or classes, the number of
shares to which such option will be applicable and the Option Price for such
shares will be appropriately adjusted by the Committee.
15. Use of Funds.
------------
All payroll deductions received or held by the Company under this
Plan may be used by the Company for any corporate purpose, and the Company
will not be obligated to segregate any payroll deduction.
16. Amendment or Termination.
------------------------
The Board has complete power and authority to terminate, suspend or
amend the Plan; except, however, that the Board cannot, without the approval
of the shareholders of the Company (i) increase the maximum number of shares
that may be issued under any Offering (except pursuant to paragraph 14); (ii)
amend the requirements as to the class of Employees eligible to purchase
stock under the Plan; or (iii) permit the members of the Committee if
designated, to purchase Shares under the Plan. No termination, suspension or
amendment of the Plan may without the consent of an Employee then having an
option under the Plan to purchase Shares, adversely affect the rights of such
Employee under such option.
17. Effective Date.
--------------
The Plan will become effective as of July 1, 1995, subject to
approval of the Plan by the holders of the majority of the shares of Common
Stock present and represented at a special or annual meeting of the
shareholders held on or before June 30, 1996. If such shareholder approval
is not received on or before June 30, 1996, all monies held in the accounts
of Participants will be refunded to the Participants, with interest.
18. No Employment Rights.
--------------------
The Plan does not, directly or indirectly, create any right for any
Employee or class of Employees to purchase any shares under the Plan, or
create in any Employee or class of employees any right with respect to
continuation of employment by the Company, and it will not be deemed to
interfere in any way with the Company's right to terminate, or otherwise
modify, an Employee's employment at any time.
19. Effect of Plan.
--------------
The provisions of the Plan will, in accordance with its terms, be
binding upon, and inure to the benefit of, all successors of each
Participant, including without limitation, such Participant's estate and the
executors, administrators, or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy, or representative of creditors of such
Participant.
20. Governing Law.
-------------
The law of the Commonwealth of Pennsylvania will govern all matters
relating to this Plan.
