<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Media Logic, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Media Logic, Inc.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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*Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
N/A
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2) Form, Schedule or Registration Statement No.:
N/A
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3) Filing Party:
N/A
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4) Date Filed:
N/A
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Notes:
<PAGE> 3
MEDIA LOGIC, INC.
August 4, 1995
To Our Stockholders:
You are cordially invited to attend the Special Meeting in Lieu of
Annual Meeting of Stockholders of MEDIA LOGIC, INC., to be held at 10:00 a.m. on
Thursday, September 14, 1995, at the Holiday Inn located at 31 Hampshire Street,
Mansfield, Massachusetts.
The Notice of Meeting and the Proxy Statement that follow describe the
business to be considered and acted upon by the stockholders at the Meeting,
after which management will also report on the affairs of the Company.
The Board of Directors of the Company encourages your participation in
the Company's electoral process and, to that end, solicits your proxy. You may
give your proxy by completing, dating and signing the Proxy Card and returning
it promptly in the enclosed envelope. You are urged to do so even if you plan to
attend the meeting.
A copy of the Company's 1995 Annual Report to Stockholders is included
with the mailing.
Sincerely,
David R. Lennox
President
310 South Street, Plainville, Massachusetts 02762
<PAGE> 4
MEDIA LOGIC, INC.
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1995
--------------------
Notice is hereby given that the Special Meeting in Lieu of Annual
Meeting (the "Meeting") of Stockholders of Media Logic, Inc. (the "Company")
will he held at the Holiday Inn located at 31 Hampshire Street, Mansfield,
Massachusetts, on Thursday, September 14, 1995, at 10:00 a.m., local time, to
consider and act upon the following matters:
1. A proposal to set the number of directors of the Company at
seven (7) and to elect two Class III directors of the Company
each to hold a three-year term.
2. A proposal to ratify the amendment of the Company's 1991 Stock
Option Plan to increase the number of shares authorized for
issuance under the Plan.
3 A proposal to ratify the appointment of Arthur Andersen LLP as
independent public accountants of the Company.
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Stockholders of record at the close of business on July 17, 1995, are
entitled to notice of and to vote at the Meeting and any adjourned sessions
thereof. All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors
PAUL M. O'BRIEN
Clerk
Plainville, Massachusetts
August 4, 1995
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY, AND PROMPTLY RETURN IT IN THE PREADDRESSED
ENVELOPE PROVIDED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW
ANY PROXY GIVEN BY YOU AND VOTE YOUR SHARES IN PERSON.
<PAGE> 5
-1-
MEDIA LOGIC, INC.
310 SOUTH STREET
PLAINVILLE, MASSACHUSETTS 02762
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of MEDIA LOGIC, INC. (the "Company") of proxies for
use at the Special Meeting in Lieu of Annual Meeting of Stockholders (the
"Meeting") to be held on September 14, 1995, and at any adjourned session
thereof. This proxy statement was first mailed to stockholders on or about
August 4, 1995. All solicitation expenses, including costs of preparing,
assembling and mailing proxy material, will be borne by the Company.
The close of business on July 17, 1995, has been established as the
record date for determining the stockholders entitled to notice of and to vote
at the Meeting and at any adjournments thereof. As of the record date, there
were issued and outstanding and entitled to vote 4,979,200 shares of common
stock of the Company, par value $.01 per share ("Common Stock"). Holders of
shares of Common Stock are entitled to one vote for each share owned at the
record date on all matters to come before the Meeting and any adjournments
thereof. The presence in person or by proxy of holders of a majority of the
shares of Common Stock entitled to vote at the Meeting constitutes a quorum for
the transaction of business.
Any proxy may be revoked at any time before it is voted by written
notice, received by the Clerk of the Company at least 24 hours prior to the
Meeting; but if not so revoked, the shares represented by such proxy will be
voted. All proxies will be voted in accordance with the instructions contained
therein. If no choice is specified for one or more proposals in a proxy
submitted by or on behalf of a stockholder, the shares represented by such proxy
will be voted in favor of such proposals and in the discretion of the named
proxies with respect to any other proposals which may properly come before the
Meeting. Broker non-votes and proxies that withhold authority to vote for
election as a director or that reflect abstentions will be deemed present for
the purpose of determining the presence of a quorum for the transaction of
business. A broker non-vote will have no effect on the outcome of voting on
such proposal. An abstention with respect to a proposal will have the effect of
a vote against such proposal.
The Board of Directors does not know of any matters which will be
brought before the Meeting other than those matters specifically set forth in
the notice of Meeting (the "Notice"). However, if any other matter properly
comes before the Meeting, it is intended that the persons named in the enclosed
form of Proxy, or their substitute acting thereunder, will vote on such matter
in accordance with their best judgment.
PROPOSAL I
ELECTION OF DIRECTORS
Section 50A of Chapter 156B of the Massachusetts General Laws provides
for a Board of Directors, of such number as is fixed by the directors, and which
is divided into three classes serving staggered three-year terms. The Board of
Directors has fixed the number of Directors at seven (7). At the Meeting, the
terms of the members of Class III, Francis S. Wyman and David R. Lennox, expire.
Messrs. Wyman and Lennox are the only nominees for election as Class III
Directors for a term to expire at the 1998 Annual Meeting of Stockholders.
<PAGE> 6
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Unless authority is withheld, it is the intention of the persons voting
under the enclosed proxy to vote such proxy in favor of the election of Messrs.
Wyman and Lennox to be directors of the Company until the 1998 Annual Meeting of
Stockholders and until their successors are elected and qualified. The
affirmative vote of a majority of the shares of Common Stock present or
represented at the Meeting by proxy is required for the election of Messrs.
Wyman and Lennox.
The members of Class I, with a term expiring at the 1996 Annual Meeting
of Stockholders, are F. Michael Hruby, Joseph L. Mitchell and William E. Davis.
The members of Class II, with a term expiring at the 1997 Annual Meeting of
Stockholders, are Klaus J. Peter and Harold B. Shukovsky.
The following table sets forth, with respect to the members of the
Board of Directors and management of the Company, (1) the name, age and length
of service as a director or executive officer, (ii) the principal occupation and
business experience of such person for at least the past five years, (iii) the
names of certain other companies of which such person currently serves as a
director or executive officer and, (iv) the amount and percentage of Common
Stock owned by each such person as of July 17, 1995. Messrs. Lennox and Peter
are the only persons known to the Company to be the beneficial owners, as of
July 17, 1995, of more than five percent of the outstanding shares of Common
Stock of the Company. The address for each person listed below is c/o the
Company at 310 South Street, Plainville, Massachusetts.
<TABLE>
<CAPTION>
Position and Offices
with the Company and Amount of Percent of
Other Business Common Common
Experience During Stock Stock
Name Last Five Years Owned Outstanding
---- --------------- ----- -----------
<S> <C> <C> <C>
William E. Davis . . . . . Mr. Davis joined the Company in 4,000 *
Age 45 September 1994 as Chief Operating
Officer and has been the Chief Executive
Officer of the Company since April 1995.
Prior to joining the Company, Mr. Davis
was Vice President and General Counsel
to Steinway Musical Properties, Inc.
from 1985 to 1994.
David R. Lennox . . . . . . Mr. Lennox is the founder of the Company 827,900(1) 16.6
Age 47 and served as Chief Executive from
August 1982 to April 1995 He has served
as Chairman of the Board of Directors
since August 1982 and is currently the
President of the Company.
Klaus J. Peter . . . . . . Mr. Peter joined the Company in August 383,700(2) 7.6
Age 55 1984 as Vice President in charge of
research and development and engineering
and was elected a Director in October
1986, Treasurer in September 1988 and
Executive Vice President in 1990.
Joseph L. Mitchell . . . . Mr. Mitchell was elected a Director in 5,755(3) *
Age 66 October 1986. He is a member of the
Massachusetts Bar and has been engaged
in the private practice of law since
1957.
</TABLE>
<PAGE> 7
-3-
<TABLE>
<S> <C> <C> <C>
Dr. Harold B. Shukovsky . . Mr. Shukovsky was elected a Director in 12,333(4) *
Age 53 October 1986. He was most recently a
Senior Consulting Engineer with a
division of Digital Equipment
Corporation from which he retired in May
1992.
Francis S. Wyman . . . . . Mr. Wyman was elected a Director in 23,778(5) *
Age 59 October 1986. He is a member of the
Massachusetts Society of Accountants,
has been engaged in public accounting
since 1957, and since 1962 has operated
his own accounting firm.
F. Michael Hruby. . . . . . Mr. Hruby is President of Technology 5,555(6) *
Age 49 Marketing Group, Inc., a technology
consulting firm which he founded in
1984. Technology Marketing Group, Inc.
provides technology strategy, expansion
and marketing services to science and
engineering-driven firms. Mr. Hruby is
a director of Fiber Spar and Tube
Company, Inc. and International
Polarizer, Inc.
Paul M. O'Brien . . . . . . Mr. O'Brien joined the Company in 141,500(7) 2.8
Age 52 September 1990 as Chief Financial
Officer and was elected Vice President
in 1993. Prior to joining the Company,
Mr. O'Brien was Vice President of
Finance of Rosenthal Technic, N.A.
</TABLE>
- - -------------------------------
* Less than 1%.
(1) Includes 8,400 shares held in trust for Mr. Lennox's minor son and 73,400
shares subject to options exercisable within 60 days.
(2) Includes 73,400 shares subject to options exercisable within 60 days.
(3) Includes 5,555 shares subject to options exercisable within 60 days. Does
not include 8,400 shares held as a co-trustee of a trust in which Mr.
Mitchell has no pecuniary interest.
(4) Includes 8,333 shares subject to options exercisable within 60 days.
(5) Includes 2,778 shares subject to options exercisable within 60 days. Does
not include 8,400 shares held as a co-trustee of a trust in which Mr.
Wyman has no pecuniary interest.
(6) Includes 5,555 shares subject to options exercisable within 60 days.
(7) Includes 105,000 shares subject to options exercisable within 60 days.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1995 ("Fiscal Year 1995"), the
Board held 9 meetings. During Fiscal Year 1995, each incumbent director attended
at least 75% of the aggregate of the total number of meetings of the Board and
the total number of meetings held by all committees on which the individual
director served.
The Audit Committee presently is composed of two directors: Harold B.
Shukovsky and Francis S. Wyman. Responsibilities of this committee include
engagement of independent auditors, review of audit fees,
<PAGE> 8
-4-
supervision of matters relating to audit functions, review and setting of
internal policies and procedures regarding audits, accounting and other
financial controls, and reviewing related party transactions. The Audit
Committee met one time during Fiscal Year 1995.
The Compensation Committee presently is composed of four directors:
Joseph L. Mitchell, Harold B. Shukovsky, Francis S. Wyman, and F. Michael Hruby.
Mr. Hruby was elected to the Compensation Committee in April 1995.
Responsibilities of this committee include approval of remuneration arrangements
for executive officers of the Company, review and approval of compensation plans
relating to executive officers and directors, including grants of stock options
and other benefits under the Company's stock option plan, and general review of
the Company's employee compensation policies. None of the members of the
Compensation Committee has been an employee of the Company at any time and none
has any relationship with either the Company or the Company's officers requiring
disclosure under applicable regulations of the Securities and Exchange
Commission. During Fiscal Year 1995, the Compensation Committee met three times.
EXECUTIVE COMPENSATION
The table below sets forth certain compensation information for the
fiscal years ended 1995, 1994 and 1993 with respect to the Company's Chief
Executive Officer and the other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND FISCAL ------------------- AWARDS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(2)
------------------ --------- ----------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
William E. Davis (3) 1995 $68,316 -0- -0- $1,113
Chief Executive Officer
David R. Lennox 1995 150,917 -0- -0- 2,260
Chairman and President 1994 148,682 -0- -0- 4,206
1993 139,615 232,562 -0- 1,038
Klaus J. Peter 1995 146,827 -0- -0- 2,261
Executive Vice President 1994 148,573 -0- -0- 4,211
1993 139,615 232,562 -0- 1,038
Paul M. O'Brien 1995 110,000 -0- -0- 3,287
Vice President and 1994 103,350 -0- 15,000 3,295
Chief Financial Officer 1993 104,807 -0- -0- 381
</TABLE>
- - --------------------------
(1) Bonuses in 1993 for Messrs. Lennox and Peter were paid pursuant to
formula arrangements in their employment contracts in effect during
such period based on a percentage of the Company's net income for the
fiscal year ended March 31, 1993.
(2) Numbers presented represent the Company's matching contributions under
the Company's 401(k) Plan for Fiscal Years 1995, 1994 and 1993.
(3) Mr. Davis joined the Company as Chief Operating Officer in September
1994 and was elected Chief Executive Officer in April 1995. See
"Executive Employment Agreements."
<PAGE> 9
-5-
The following two tables disclose, for the Chief Executive Officer and
the other named executives, information regarding stock options granted or
exercised during, or held at the end of, Fiscal Year 1995 pursuant to the
Company's stock option plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable
----------------- Value at Assumed
Number of % of Total Annual Rates
Securities Options of Stock Price
Underlying Granted to Exercise Appreciation
Options Employees in Price Expiration for Option Term
Name Granted (#) Fiscal Year ($/sh) Date ---------------
- - ---- ----------- ------------ -------- ---------- 5%($) 10%($)
----- ------
<S> <C> <C> <C> <C> <C> <C>
William E. Davis 75,000(1) 22.6 $2.50 9/20/04 117,750 298,827
75,000(1) 22.6 $1.9375 3/31/05 56,306 142,690
David R. Lennox - - - - - -
Klaus J. Peter - - - - - -
Paul M. O'Brien - - - - - -
</TABLE>
- - ---------------
(1) Grants under the Company's 1991 Stock Option Plan. Exercises of
one-third of the options granted are permitted annually commencing on
September 29, 1995, and March 31, 1996, respectively, provided that
Mr. Davis is employed by the Company on such date. However, such
options shall fully and immediately vest and become purchasable if Mr.
Davis (a) voluntarily terminates his employment with the Company for
"good reason," (b) is terminated by the Company for any reason other
than "cause," (c) is terminated within one year after a "change of
control," or (d) is terminated by reason of his death or permanent or
total disability. Such options are not transferable, other than by
will or the laws of descent and distribution.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Numbers of Securities Value of Unexercised
Underlying Unexercised In-the Money Options at
Options at 3/31/95(#) 3/31/95($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized ($) Unexercisable Unxercisable(1)
---- -------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
William E. Davis -0- -0- 0/150,000 -0-
David R. Lennox -0- -0- 73,400/0 111,935/0
Klaus J. Peter -0- -0- 73,400/0 111,935/0
Paul M. O'Brien -0- -0- 110,000/5,000 156,250/0
</TABLE>
- - -------------------
(1) Value is based on the closing sale price of the Common Stock as of
March 31, 1995 ($1-15/16) minus the exercise price.
<PAGE> 10
-6-
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with
William E. Davis on September 30, 1994, pursuant to which the Company agreed to
employ Mr. Davis as Chief Operating Officer. Mr. Davis received a base salary
at an annual rate of $135,000 through January 1, 1995, at which time, pursuant
to such employment agreement, the annual rate of such salary was increased to
$150,000. The employment agreement of Mr. Davis was amended in April 1995, at
which time Mr. Davis assumed the position of Chief Executive Officer of the
Company. Pursuant to such amended employment agreement, which terminates March
31, 1998, the Company is to pay Mr. Davis a base salary at an annual rate of
$200,000. Additionally, Mr. Davis may receive an annual bonus of cash and/or
equity in an amount up to 100% of his base salary to be determined by the
Compensation Committee. No bonus was paid to Mr. Davis in Fiscal Year 1995.
In April 1995, the Company entered into an amendment of the employment
agreement of Paul M. O'Brien, pursuant to which the Company agreed to employ
Mr. O'Brien as Vice President and Chief Financial Officer through March 31,
1998. The base salary for the term of the agreement was set at $120,000. Mr.
O'Brien is entitled to receive an annual bonus in cash and/or equity of the
Company in an amount up to 50% of base salary, to be determined by the
Compensation Committee. No bonus was paid to Mr. O'Brien in Fiscal Year 1995.
Pursuant to their current employment agreements, each of Messrs. Davis
and O'Brien is entitled to severance pay in an amount equal to the greater of
(a) the remainder of his salary through the expiration of the employment
contract or (b) an amount equal to one full year of his then current salary if
his employment is terminated (i) by reason of death or disability, (ii) by the
Company for any reason other than cause, (iii) by him for "Good Reason" (as
defined in such employee's employment agreement). Each of Messrs. Davis and
O'Brien is entitled to severance pay in the amount of one dollar less than
three times his "base amount" of compensation and benefits (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended) if his
employment is terminated within one year of a "Change in Control" (as defined
in such employee's employment agreement).
DIRECTOR COMPENSATION
The Company pays non-employee directors $1,000 for attendance at each
meeting of the Board of Directors and committees thereof. The Company also pays
expenses for attendance at meetings of the Board of Directors and committees
thereof.
<PAGE> 11
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REPORTS OF BENEFICIAL OWNERSHIP
Based solely on a review of reports furnished to the Company or
written representations from the Company's directors and executive officers,
the Company believes that all reports required to be filed pursuant to Section
16 of the Securities Exchange Act of 1934 were filed timely by the Company's
directors, executive officers and ten percent holders during Fiscal Year 1995.
CERTAIN TRANSACTIONS
The Company leases its main facility in Plainville, Massachusetts,
from D&K Realty Trust (the "Trust"). David R. Lennox and Klaus J. Peter,
officers and directors of the Company, are beneficial owners of the Trust. In
April 1993, the Company entered into a revised lease with the Trust for a term
of fifteen (15) years and renewable for fifteen (15) years on the same terms.
In 1992 the Company had an independent appraisal of the premises and, based on
such appraisal, the Company believes that the rental per square foot is
comparable to that of other facilities in the area and is reasonable and fair.
Lease payments by the Company to the Trust in Fiscal Year 1995 totaled
approximately $83,400, and in the fiscal year ended March 31, 1994 ("Fiscal
Year 1994") totaled approximately $65,000. Further, in the fiscal year ended
March 31, 1993 ("Fiscal Year 1993"), the Company paid approximately $194,800
for an addition and improvements to the facility. The Trust has reimbursed the
Company for these expenses.
In Fiscal Year 1993 the Company made sales of approximately $111,000
to a Hong Kong distributor of which Messrs. Lennox and Peter were directors.
No such sales were made in Fiscal Year 1994 or Fiscal Year 1995.
F. Michael Hruby, a Director of the Company, is the President of
Technology Marketing Group, Inc. which provided technology consulting services
to the Company during Fiscal Year 1995, including the period April 1994 through
July 1994. During such period the Company paid Technology Marketing Group
$56,696 for professional fees and expenses.
PROPOSAL 2
AMENDMENT OF THE COMPANY'S 1991 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE PLAN
The Board of Directors has authorized, subject to stockholder
ratification, an increase in the number of shares available under the Company's
1991 Stock Option Plan, as amended (the "Plan"), from 1,000,000 to 1,500,000
shares.
Purpose. The purpose of the Plan is to attract and retain the best
available personnel for positions of substantial responsibility and to provide
additional incentive to employees of the Company. The purpose of the proposed
amendment is to provide the Company with additional capacity to award stock
options to existing personnel and to attract qualified new employees through
grants of stock options.
Administration. The Plan is administered by the Compensation
Committee (the "Committee") which consists of directors of the Company
appointed by its Board of Directors. The Committee is currently composed of
Messrs. Hruby, Mitchell, Shukovsky and Wyman. Subject to the provisions of the
Plan, the Committee has discretion to determine when awards are made, which
employees are granted awards, the number of shares subject to each award and
all other relevant terms of the awards. The Committee also has broad
discretion to construe and interpret the Plan and adopt rules and regulations
thereunder.
Eligibility. Awards may be granted to persons who are employees of
the Company whether or not officers or members of the Board of Directors of the
Company. Pursuant to the Plan, incentive stock options may only be
<PAGE> 12
-8-
granted to employees, non-qualified stock options may be granted to directors,
advisors and consultants of the Company as well as employees.
Shares Subject to the Plan. The shares issued or to be issued under
the Plan are shares of the Company's Common Stock, $.01 par value, which may be
newly issued shares or shares held in the treasury or acquired in the open
market. Previously, no more than 1,000,000 Shares could be issued under the
Plan. The foregoing limit is subject to adjustment for stock dividends, stock
splits or other changes in the Company's capitalization.
Stock Options. The Committee in its discretion may issue stock
options which qualify as incentive stock options under the Internal Revenue
Code or non-qualified stock options. The Committee will determine the time or
times when each stock option becomes exercisable, the period within which it
remains exercisable and the price per share at which it is exercisable,
provided that no incentive stock option shall be exercised more than 10 years
after it is granted and no other options shall be exercised more than 10 years
and one day after it is granted, and further provided that the exercise price
of incentive stock options may not be less than the fair market value of the
Company's Common Stock on the date of grant. The reported closing price of the
Company's Common Stock by the American Stock Exchange on July 21, 1995, was
$3.50 per share.
Options are not assignable or transferable except upon the death of an
optionee. Options may be exercised only while the optionee is employed by the
Company and for three months thereafter or six months after the death of an
employee by the administrator of the estate of such employee. However, if an
optionee's employment with the Company is terminated within one year of a
Change in Control (as defined in the Plan), all options granted pursuant to the
Plan to such optionee shall immediately vest and become purchasable.
In September 1994, the Company's shareholders ratified an amendment to
the Plan under which members of the Board of Directors who are not employees of
the Company are automatically granted non-qualified stock options on the date
each non-employee director is elected or reelected to the Board of Directors
for a three-year term to purchase the number of shares of Common Stock of the
Company determined by dividing $25,000 by the fair market value of a share of
the Company's Common Stock as of the date of grant, or an option to purchase a
pro rata amount of shares if such director is elected or reelected to serve
less than a three-year term. In addition, the amendment provided that any
non-employee director who is appointed by the Board of Directors will receive
on the date of the next Annual Stockholders Meeting of the Company an option to
purchase a pro rata number of shares. The exercise price for such options is
to be equal to the fair market value of the Company's Common Stock on the date
of grant. Each such option expires at the earlier of (i) 90 days after such
non-employee director no longer serves as a director of the Company or (ii) the
end of ten years and one day after the date on which the option was granted.
Each option is fully exercisable on the date of grant.
As of July 1, 1995, options for the purchase of a total of 592,821
shares of the Common Stock were outstanding under the Plan, 302,800 of which
were exercisable, and options to purchase an additional 148,979 shares remained
available for grant under the Plan. Options granted are exercisable at varying
dates. In general, options granted vest at a rate of 33% each year for a
period of three years.
The following is a brief and general discussion of the Federal income
tax rules applicable to awards under the Plan. With respect to an incentive
stock option, an employee will generally not be taxed at the time of grant or
exercise, although exercise of an incentive option will give rise to an item of
tax preference that may result in an alternative minimum tax. If the employee
holds the shares acquired upon exercise of an incentive stock option until at
least one year after issuance and two years after the option grant, he or she
will have long-term capital gain (or loss) based on the difference between the
amount realized on the sale or disposition and his or her option price. If
these holding periods are not satisfied, then upon disposition (a
"disqualifying disposition") of the shares the employee will recognize ordinary
income equal, in general, to the excess of the fair market value of the shares
at the time of exercise over the option price, plus capital gain in respect of
any additional appreciation. With respect to a non-qualified option, an
individual will not be taxed at the time of grant; upon exercise, he or she
will generally realize compensation income to the extent the then fair market
value of the stock exceeds the option price. The Company will generally have a
tax deduction to the extent that, and at the time that, an individual realizes
compensation income with respect to an award.
<PAGE> 13
-9-
The following table sets forth as of March 31, 1995, the number of
options granted under the Plan to the persons and groups listed.
OPTIONS GRANTS UNDER THE PLAN
<TABLE>
<CAPTION>
Name Options (Shares)
---- ----------------
<S> <C>
William E. Davis . . . . . . . . . . . . . . . . 150,000
David R. Lennox . . . . . . . . . . . . . . . . . 110,000
Klaus J. Peter . . . . . . . . . . . . . . . . . 110,000
Paul M. O'Brien . . . . . . . . . . . . . . . . . 165,000
All executive officers as a group . . . . . . . . 535,000
All directors, excluding executive officers,
as a group . . . . . . . . . . . . . . . . . . 22,222
All employees, excluding executive officers,
as a group . . . . . . . . . . . . . . . . . . 326,200
</TABLE>
The Board recommends that the shareholders vote "FOR" the proposed
amendment of the Plan and the enclosed proxy will be so voted unless a contrary
vote is indicated. The affirmative vote of the holders of a majority of the
shares of the Common Stock represented in person or by proxy at the Meeting is
required for approval of the amendment of the Plan.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Arthur Andersen LLP, independent certified public accountants, have
been auditors of the Company since 1991. The Board of Directors has recommended
that the stockholders ratify the reappointment of Arthur Andersen LLP as the
Company's auditors for the current fiscal year.
A representative of Arthur Andersen LLP is expected to be present at
the Meeting and will be available to answer any appropriate questions.
The Board of Directors recommends that the shareholders vote "FOR" the
proposal to ratify the appointment of Arthur Andersen LLP, and the enclosed
proxy will be so voted unless a contrary vote is indicated. In the event the
appointment of Arthur Andersen LLP should not be approved by the shareholders,
the Board of Directors will make another appointment to be effective at the
earliest possible time.
STOCKHOLDER PROPOSALS
The Board will make provision for presentation of proposals by
shareholders at the 1996 Annual Meeting of Stockholders (or special meeting in
lieu thereof) provided such proposals are submitted by eligible shareholders who
have complied with the relevant regulations of the Securities and Exchange
Commission. Such proposals must be received by the Company no later than March
31, 1996, to be considered for inclusion to the Company's proxy materials
relating to that meeting.
<PAGE> 14
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GENERAL
The management of the Company knows of no matter other than the
foregoing to be brought before the Meeting. However, the enclosed proxy gives
discretionary authority in the event any additional matters should be presented.
The Company expects to hold its next stockholder meeting on or about
September 5, 1996, and proxy materials in connection with that meeting are
expected to be mailed approximately 30 days prior to the meeting.
DAVID R. LENNOX
President
<PAGE> 15
APPENDIX
MEDIA LOGIC, INC.
1991 Stock Option Plan
(1994 Restatement)
1. DEFINITIONS. As used in this 1991 Stock Option Plan of Media
Logic, Inc., the following terms shall have the following meanings:
CODE means the Internal Revenue Code of 1986, as amended.
COMMITTEE means a committee comprised of two or more Directors of the
Company, appointed by the Board of Directors of the Company, responsible
for the administration of the Plan, as provided in Section 4.
COMPANY means Media Logic, Inc., a Massachusetts corporation.
GRANT DATE means the date on which an Option is granted, as specified
in Section 7 or Section 10.
INCENTIVE OPTION means an Option that satisfies the requirements of
Section 422 of the Code.
MARKET VALUE means, as of a certain date, the fair market value for a
share of the Stock on such date as determined by the Committee.
NONSTATUTORY OPTION means an Option that will not be treated as an
Incentive Option.
OPTION means an option to purchase shares of the Stock granted under
the Plan, which shall be either an Incentive Option or a Nonstatutory
Option.
OPTION AGREEMENT means an agreement between the Company and an
Optionee, setting forth the terms and conditions of an Option.
OPTIONEE means a person eligible to receive an Option, as provided in
Section 6 or Section 10, to whom an Option shall have been granted under
the Plan.
PERSON means any individual, corporation, partnership or other person
or entity, together with its "Affiliates" and "Associates" (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934).
<PAGE> 16
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PLAN means this 1991 Stock Option Plan of the Company, as amended.
STOCK means the Common Stock, $.01 par value per share, of the
Company.
2. PURPOSE. The Plan is intended to encourage ownership of the Stock by
employees, consultants and directors of the Company and its subsidiaries and is
intended to provide additional incentive for them to promote the success of the
Company's business. The Plan is intended to be an incentive stock option plan
within the meaning of Section 422 of the Code, but not all Options granted
hereunder are required to be or to remain Incentive Options.
3. TERM OF THE PLAN. Options under the Plan may be granted on or after
July 25, 1991 but not later than July 24, 2001.
4. ADMINISTRATION. The Plan shall be administered by the Committee. No
member of the Committee shall have received an Option during service on the
Committee or during the one-year period preceding such service, other than an
Option received pursuant to Section 10. Subject to the provisions of the Plan,
the Committee shall have complete authority, in its discretion, to make the
following determinations with respect to each option to be granted by the
Company to any employee of the Company or a subsidiary: (a) whether the Option
will be an Incentive Option or a Nonstatutory Option; (b) the person to receive
the Option; (c) the time of granting the Option; (d) the number of shares
subject to the Option; (e) the option price for any Nonstatutory Option; (f)
the vesting period (if any) applicable to, and the term of, any Option; and (g)
the restrictions (if any) to be imposed upon transfer of shares of the Stock
purchased by the Optionee upon the exercise of the Option. The Committee shall
have complete authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective option agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee's determination on the matters referred to in this Section 4
shall be conclusive.
5. STOCK SUBJECT TO THE PLAN. The Plan covers 1,000,000 shares of
Stock, subject, however, to the provisions of Section 15. The number of shares
purchased pursuant to the exercise of options granted under the Plan and the
number of shares subject to outstanding options granted under the Plan shall be
charged against the shares covered by the Plan; but shares subject to options
which terminated without being exercised shall not be so charged. Shares to be
issued upon the exercise of options granted under the Plan may be either
authorized but unissued shares or shares held by the Company in its treasury.
If any option expires or terminates for any reason without having been
exercised in
<PAGE> 17
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full, the shares not purchased thereunder shall again be available for options
thereafter to be granted.
6. ELIGIBILITY. An Incentive Option may be granted only to an employee
of the Company or one or more of its subsidiaries. A Nonstatutory Option may
be granted to any person designated by the Committee. Any person who, within
the meaning of Section 422(b)(6) of the Code, is deemed to own stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company (or of a parent or subsidiary corporation thereof) shall be eligible to
receive an Incentive Option only if the option price of such Incentive Option
is at least 110% of the Market Value as of the Grant Date and the term of such
Incentive Option is not more than five years.
7. TIME OF GRANTING OPTIONS. Subject to the provisions of the Plan, the
granting of Options shall take place at the time specified by the Committee.
8. OPTION PRICE. Subject to the provisions of the Plan, the option
price for each Incentive Option shall be the Market Value on the Grant Date and
the option price for each Nonstatutory Option shall be determined by the
Committee.
9. MAXIMUM SIZE OF OPTIONS. The aggregate Market Value of Stock for
which Incentive Options become exercisable by an Optionee for the first time in
any calendar year shall not exceed $100,000. To the extent that such aggregate
Market Value exceeds $100,000, those options intended to be Incentive Options
shall be treated as Nonstatutory Options. For purposes of this Section 9, all
Incentive Options granted to an Optionee by the Company shall be considered in
the order in which they were granted, and the Market Value shall be determined
as of each Grant Date. The maximum number of Options which may be granted in
any fiscal year to any one individual is 200,000.
10. FORMULA AWARDS.
10.1. AUTOMATIC GRANTS. On each date that a Non-Employee
Director (as defined below) is elected or reelected to the Board of
Directors by the stockholders of the Company, such Non-Employee Director
shall receive a Nonstatutory Option for the purchase of the number of
shares of Stock determined by dividing $25,000 by the fair market value of
a share of Stock as of the Grant Date, or an option to purchase a pro rata
amount of shares if such director is elected or reelected to serve less
than a three-year term. Any Non-Employee Director who is appointed by the
Board of Directors shall receive on the date of the next Annual
Stockholders Meeting (or special meeting in lieu thereof) of the Company a
Nonstatutory Option to purchase a pro rata number of Shares based upon the
number of years, if any, until such Non-Employee Director will stand for
re-election to the
<PAGE> 18
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Board of Directors. On the date of the first Annual Meeting of
Stockholders after the date of the adoption of this 1994
Restatement of the Plan, each Non-Employee Director who is not standing
for election or reelection at such Annual Meeting shall receive a
Nonstatutory Option to purchase (i) in the case of any such Non-Employee
Director whose term as a director expires at the Company's 1996 Annual
Meeting of Stockholders, the number of shares of Stock determined by
dividing $25,000 by the fair market value of a share of Stock as of the
Grant Date and multiplying such amount by 0.667 and (ii) in the case of
any such Non-Employee Director whose term as a director expires at the
Company's 1995 Annual Meeting of Stockholders, the number of shares of
Stock determined by dividing $25,000 by the fair market value of a share
of Stock as of the Grant Date and multiplying such amount by 0.333.
10.2. TERM AND VESTING. Each Option granted under Section 10.1
shall expire at the earlier of (i) 90 days after such Non-Employee
Director no longer serves as a director of the Company or (ii) the end of
ten years and one day after the Grant Date. Each Option shall be fully
exercisable on the Grant Date.
10.3. NON-EMPLOYEE DIRECTOR. For purposes of the grant of
Options hereunder upon election or reelection to the Board of Directors,
"Non-Employee Director" shall mean a member of the Board of Directors who
is not an employee of the Company on the date of such election or
reelection, as applicable.
11. EXERCISE OF OPTION. In order to exercise an Option, the Optionee
shall give written notice of exercise to the Chief Financial Officer of the
Company. The Optionee shall enclose a personal check equal to the option price
or shares of Stock with a Market Value on the purchase date at least equal to
the option price. The Company shall deliver or cause to be delivered to the
Optionee a certificate for the number of shares then being purchased by him.
If any law or applicable regulation of the Securities and Exchange Commission
or other body having jurisdiction in the premises shall require the Company or
the Optionee to take any action in connection with shares being purchased upon
exercise of the option, exercise of the option and delivery of the certificate
or certificates for such shares shall be postponed until completion of the
necessary action. Each outstanding Option shall be reduced by one share for
each share of the Stock purchased upon exercise of the option.
12. PURCHASE FOR INVESTMENT. Unless the shares to be issued upon
exercise of an Option have been effectively registered under the Securities Act
of 1933 as now in force or hereafter amended, the Company shall be under no
obligation to issue any shares covered by any Option unless the person who
exercises the Option, in whole or in part, shall give a written representation
to the
<PAGE> 19
-5-
Company, satisfactory in form and substance to its counsel and upon
which the Company may reasonably rely, that he or she is acquiring such shares
as an investment and not with a view to, or for sale in connection with, the
distribution of any such shares. Each certificate representing a share of
Stock issued pursuant to the exercise of an Option may bear a reference to any
investment representation made in accordance with this Section 12 and to the
fact that no registration statement has been filed with the Securities and
Exchange Commission in respect to that Stock.
13. WITHHOLDING; NOTICE OF DISPOSITION OF STOCK PRIOR TO EXPIRATION OF
SPECIFIED HOLDING PERIOD.
13.1. Whenever shares are to be issued upon exercise of an Option,
the Company shall have the right to require the Optionee to remit to the
Company an amount sufficient to satisfy federal, state, local or other
withholding tax requirements (whether so required to secure for the
Company an otherwise available tax deduction or otherwise) if and to the
extent required by law prior to the delivery of any certificate or
certificates for such shares.
13.2. The Company may require as a condition to the issuance of
shares covered by any Incentive Option that the person exercising the
Option give a written representation to the Company, satisfactory in form
and substance to its counsel and upon which the Company may reasonably
rely, that he or she will report to the Company any disposition of those
shares prior to the expiration of the holding periods specified by Section
422(a)(1) of the Code. If and to the extent that the disposition imposes
upon the Company federal, state, local or other withholding tax
requirements, or any such withholding is required to secure for the
Company an otherwise available tax deduction, the Company shall have the
right to require that the person making the disposition remit to the
Company an amount sufficient to satisfy those requirements.
14. TRANSFERABILITY OF OPTIONS. Options shall not be transferable,
otherwise than by will or the laws of descent and distribution, and may be
exercised during the life of the Optionee only by the Optionee; provided,
however, the Committee may grant Options that are transferable, without payment
of consideration, to immediate family members of the Optionee or to trusts or
partnerships for such family members. The Committee may also amend outstanding
Options to provide for such transferability.
15. ADJUSTMENT OF NUMBER OF SHARES. Each Option Agreement shall provide
that in the event of any stock dividend payable in the Stock or any split-up or
contraction in the number of shares of the Stock occurring after the date of
the agreement and prior to the exercise in full of the Option, the number of
shares for
<PAGE> 20
-6-
which the Option may thereafter be exercised shall be proportionately
adjusted. Each Option Agreement shall also provide that in case of any
reclassification or change of outstanding shares of the Stock, shares of stock
or other securities equivalent in kind and value to those shares which a holder
would have received if he or she had held the full number of shares of the
Stock subject to the Option immediately prior to such reclassification or
change and had continued to hold those shares (together with all other shares,
stock and securities thereafter issued in respect thereof) to the time of
exercise of the Option shall thereupon be subject to the Option. Each Option
Agreement shall also provide that in case of any consolidation or merger of the
Company with or into another company or in case of any sale or conveyance to
another company or entity of the property of the Company as a whole, the Option
shall terminate and, to the extent that the value of the shares of stock, other
securities or cash which a stockholder is entitled to receive for one share of
Stock in connection with such transaction exceeds the option price of the
Option, the Optionee shall be entitled to receive either cash or shares of
stock or other securities equivalent in kind to the cash or those shares which
a holder would have received if he or she had exercised the Option (to the
extent then exercisable) and held the number of shares of the Stock upon such
exercise immediately prior to such consolidation, merger, sale or conveyance
and with a value equal to such excess amount multiplied by the number of shares
he or she would have received if he or she so exercised the Option at such
time. Each Option Agreement shall further provide that upon dissolution or
liquidation of the Company, the Option shall terminate, but the Optionee (if at
the time in the employ of the Company or any of its subsidiaries) shall have
the right, immediately prior to such dissolution or liquidation, to exercise
the Option to the full extent not theretofore exercised. No fraction of a
share shall be purchasable or deliverable, but in the event any adjustment of
the number of shares covered by the Option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the nearest smaller
whole number of shares. In the event of changes in the outstanding Common
Stock by reason of any stock dividend, split-up, contraction, reclassification,
or change of outstanding shares of the Stock of the nature contemplated by this
Section 15, the number of shares of the Stock available for the purpose of the
Plan as stated in Section 5 shall be correspondingly adjusted.
16. LIMITATION OF RIGHTS IN OPTION STOCK. The Optionee shall have no
rights as a stockholder in respect of shares as to which his or her Option
shall not have been exercised, certificates issued and delivered and payment as
herein provided made in full, and shall have no rights with respect to such
shares not expressly conferred by this Plan.
17. STOCK RESERVED. The Company shall at all times during the term of
the Options reserve and keep available such number of shares of the Stock as
will be sufficient to satisfy the requirements of this Plan and shall pay all
other fees and expenses necessarily incurred by the Company in connection
therewith.
<PAGE> 21
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18. PURCHASE FOR INVESTMENT. The Optionee shall make such
representations with respect to investment intent and the method of disposal of
optioned shares as the Board of Directors of the Company may deem advisable in
order to assure compliance with applicable securities laws.
19. TERMINATION AND AMENDMENT OF PLAN. The Board of Directors of the
Company may at any time terminate the Plan or make such modifications of the
Plan as it shall deem advisable, provided, however, that, if required by
applicable law with respect to a certain modification, the Board shall seek the
approval of such modification by the holders of a majority of the outstanding
Stock present or represented and entitled to vote at a meeting of the
stockholders of the Company, and further provided, that the Board of Directors
of the Company may not amend the Plan more than once in any six (6) month
period so as to modify Section 10, except that the Board of Directors may make
an amendment to Section 10 to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules and
regulations under either such statute. No termination or amendment of the Plan
may, without the consent of the Optionee to whom any Option shall theretofore
have been granted, adversely affect the rights of that Optionee under that
Option.
