<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[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)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
MEDIA LOGIC, INC.
August 6, 1998
Dear Stockholder,
You are cordially invited to attend the 1998 Special Meeting in Lieu of
Annual Meeting of Stockholders of Media Logic, Inc. (the "Company") to be held
at 10:00 a.m. on Thursday, September 10, 1998 at the Holiday Inn located at 31
Hampshire Street, Mansfield, Massachusetts.
At the Special Meeting in Lieu of Annual Meeting, one person will be elected
to the Board of Directors. In addition, the Company will ask the Stockholders to
approve an amendment to the Company's Restated Articles of Organization to
increase the number of authorized shares of Common Stock from 20,000,000 shares
to 30,000,000 shares, as well as to approve the adoption of the Media Logic,
Inc. 1998 Employee, Director and Consultant Stock Option Plan (the "1998 Plan")
and the reservation of 2,000,000 shares of Common Stock for options which may be
granted under the 1998 Plan, and to ratify the selection of Arthur Andersen LLP
as the Company's independent public accountants. The Board of Directors
recommends the approval of each of these proposals. Such other business will be
transacted as may properly come before the Special Meeting in Lieu of Annual
Meeting.
We hope you will be able to attend the Special Meeting in Lieu of Annual
Meeting. Whether you plan to attend the Special Meeting in Lieu of Annual
Meeting or not, it is important that your shares are represented. Therefore, you
are urged promptly to complete, sign, date and return the enclosed proxy card in
accordance with the instructions set forth on the card. This will ensure your
proper representation at the Special Meeting in Lieu of Annual Meeting.
Sincerely,
[LOGO]
Gregory Scorziello
President and Chief Executive Officer
Media Logic, Inc.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
<PAGE>
MEDIA LOGIC, INC.
NOTICE OF
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
To the Stockholders of Media Logic, Inc.
NOTICE IS HEREBY GIVEN that the Special Meeting in Lieu of Annual Meeting of
Stockholders (the "Meeting") of Media Logic, Inc. (the "Company") will be held
at the Holiday Inn located at 31 Hampshire Street, Mansfield, Massachusetts, on
Thursday, September 10, 1998, at 10:00 a.m., local time, to consider and act
upon the following matters:
1. To elect one Class III director of the Company, to hold office for a
three-year term.
2. To consider and act upon a proposal to approve an amendment to the
Company's Restated Articles of Organization to increase the number of
authorized shares of Common Stock from 20,000,000 shares to 30,000,000
shares.
3. To consider and act upon a proposal to approve the adoption of the Media
Logic, Inc. 1998 Employee, Director and Consultant Stock Option Plan (the
"1998 Plan") and the reservation of 2,000,000 shares of Common Stock for
stock options which may be granted under the 1998 Plan.
4. To consider and act upon a proposal to ratify the appointment of Arthur
Andersen LLP as independent public accountants of the Company.
5. To transact such other business as may properly come before the Meeting
or any adjournments thereof, including but not limited to the adjournment
of the Meeting for purposes of soliciting additional proxies to achieve a
quorum or to obtain an affirmative vote on a proposal.
Stockholders of record at the close of business on July 20, 1998, 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
John T. Loughran
CLERK
Plainville, Massachusetts
August 6, 1998
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>
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 10, 1998, and at any adjourned session thereof. This proxy
statement was first mailed to stockholders on or about August 6, 1998.
All solicitation expenses, including costs of preparing, assembling and
mailing proxy material, will be borne by the Company. In addition, the Company
will reimburse brokerage firms and other persons representing beneficial owners
of common stock of the Company for their expenses in forwarding proxy material
to such beneficial owners. Solicitation of proxies by mail may be supplemented
by telephone, telegram, telex and personal solicitation by the directors,
officers or employees of the Company. No additional compensation will be paid
for such solicitations. Additional solicitation of holders of Common Stock by
mail, telephone, telegraph or by personal solicitation will be made by The
Altman Group, Inc., at an anticipated cost to the Company of approximately
$7,500 plus out-of-pocket expenses.
The close of business on July 20, 1998 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 13,333,409 shares of common stock of
the Company, par value $.01 per share (the "Common Stock"). Holders of shares of
Common Stock are entitled to one vote for each share owned on 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 FOR
the nominee for director, FOR items 2, 3 and 4 above and in the discretion of
the proxy holders on any adjournments of the Meeting or 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. The affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting is required to approve proposal 2 to amend the Company's Restated
Articles of Organization to increase the number of authorized shares of Common
Stock from 20,000,000 shares to 30,000,000 shares. Abstentions and broker
non-votes count as votes against this proposal. The affirmative vote of a
majority of the total number of shares voted either for or against each proposal
at the Meeting is required to approve each other proposal, except for the
election of directors, which requires a plurality of the shares voted. With
respect to the tabulation of votes on any matter except for proposal 2,
abstentions and non-votes have no effect on the vote.
Any decision to adjourn the meeting would be made by a vote of the holders
of shares of the Company's Common Stock present in person or by proxy at the
Meeting. It is the intention of the persons named in the proxy, unless otherwise
specifically instructed in the proxy, to vote in favor of adjournment if a
quorum is not present. If a quorum is present, but insufficient votes have been
cast in favor of a proposal to approve it, proxies will be voted in favor of
adjournment only if the Board of Directors determines that adjournment and the
additional solicitation of proxies is reasonable and in the best interests of
stockholders. In making this determination the Board would consider the nature
of the proposal; the votes already
<PAGE>
cast as a percentage of the vote required; the percentage of negative votes
cast; and the nature of any further solicitation that might be made.
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") and the possible adjournment of the Meeting for
purposes of soliciting additional proxies to achieve a quorum or to obtain an
affirmative vote on a proposal. 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 judgement.
This Proxy Statement and the accompanying proxy are being mailed on or about
August 6, 1998 to all stockholders entitled to notice of and to vote at the
Meeting.
The Annual Report to Stockholders for the fiscal year ended March 31, 1998
is being mailed to the stockholders with this Proxy Statement, but does not
constitute a part hereof.
2
<PAGE>
SHARE OWNERSHIP
The following table sets forth certain information as of July 20, 1998
concerning the ownership of Common Stock by each Stockholder known by the
Company to be the beneficial owner of more than 5% of its outstanding shares of
Common Stock, each current member of the Board of Directors, each executive
officer named in the Summary Compensation Table hereof, and all current
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED(1)
---------------------
<S> <C> <C>
NAME AND ADDRESS** NUMBER PERCENT
- ------------------------------------------------------------ --------- -------
Imprimis SB L.P. ........................................... 2,466,668(2) 16.8%
411 West Putnam Avenue, Suite 125,
Greenwich, CT 06830
Internacional Perifericos y Memorias, S.A. ................. 1,666,668(3) 11.8%
Gral, Mitre 93,
08022 Barcelona, Spain
Adar Equities LLC........................................... 1,650,000(4) 11.0%
1276 50th Street,
Brooklyn, NY 11219
Advent International Group.................................. 1,502,368(5) 10.7%
c/o Advent International Corporation
75 State St., 29th Floor, Boston, MA 02109
Wexford Spectrum Investors LLC.............................. 1,233,332(8) 8.8%
411 West Putnam Avenue, Suite 125,
Greenwich, CT 06830
Raymond W. Leclerc.......................................... 1,193,300(7) 8.9%
c/o Media Logic, Inc.
310 South Street, Plainville, MA 02762
Michael Salter.............................................. 1,201,732(8) 8.6%
c/o Media Logic, Inc.
310 South Street, Plainville, MA 02762
Gregory Scorziello.......................................... 227,221(9) 1.7%
Michael R. Bruce............................................ 25,000(10) *
All executive officers and directors as a group
(7 persons)............................................... 2,647,253(11) 18.7%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the Company's outstanding
shares of Common Stock.
** Addresses are given for beneficial owners of more than 5% of the outstanding
Common Stock only.
(1) The number of shares of Common Stock issued and outstanding on July 20, 1998
was 13,333,409. The calculation of percentage ownership for each listed
beneficial owner is based upon the number of shares of Common Stock issued
and outstanding at July 20, 1998, plus shares of Common Stock subject to
options held by such person at July 20, 1998 and exercisable within 60 days
thereafter, and shares of Common Stock issuable upon the exercise of
currently exercisable warrants issued in the Company's recent financings.
The persons and entities named in the table have sole voting and
3
<PAGE>
investment power with respect to all shares shown as beneficially owned by
them, except as noted below.
(2) Includes 1,333,334 shares issuable upon exercise of warrants to purchase
Common Stock.
(3) Includes 833,334 shares issuable upon exercise of warrants to purchase
Common Stock.
(4) Consists of 1,650,000 shares issuable upon exercise of warrants to purchase
Common Stock.
(5) Consists of ownership by the following venture capital funds managed by
Advent International Corporation: 1,262,368 shares, including 410,870 shares
issuable upon the exercise of outstanding warrants, owned by Digital Media &
Communications Limited Partnership and 240,000 shares issuable upon the
exercise of outstanding warrants owned by ACFS Limited Partnership. In its
capacity as manager of these funds, Advent International Corporation
exercises sole voting and investment power with respect to all shares held
by these funds.
(6) Includes 666,666 shares issuable upon exercise of warrants to purchase
Common Stock.
(7) Includes 25,000 shares issuable upon exercise of options to purchase Common
Stock.
(8) Includes 548,889 shares issuable upon exercise of warrants to purchase
Common Stock and 20,454 shares issuable upon exercise of options to purchase
Common Stock.
(9) Includes 27,778 shares issuable upon exercise of warrants to purchase Common
Stock and 166,665 shares issuable upon exercise of options to purchase
Common Stock.
(10) Consists of 25,000 shares issuable upon exercise of options to purchase
Common Stock.
(11) Includes 576,667 shares issuable upon exercise of warrants to purchase
Common Stock and 237,119 shares issuable upon exercise of options to
purchase Common Stock. See footnotes (7), (8), (9) and (10).
4
<PAGE>
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 three-year terms. The Board of Directors has
fixed the number of Directors at seven (7). At the Meeting, the term of the sole
Class III member, Raymond W. Leclerc, expires. Francis S. Wyman, a former Class
III Director, resigned his directorship effective as of July 22, 1998. His
vacant seat may be filled by a majority vote of the remaining Directors.. Mr.
Leclerc is the only nominee for election as a Class III Director for a term to
expire at the 2001 Annual Meeting of Stockholders.
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 Mr.
Leclerc to be a director of the Company until the 2001 Annual Meeting of the
Stockholders and until his successor is elected and qualified. The affirmative
vote of a plurality of the votes cast at the Meeting in person and by proxy is
required for the election of Mr. Leclerc.
The member of Class I, with a term expiring at the 1999 Annual Meeting of
Stockholders, is Gregory Scorziello. Mr. Scorziello was elected in March 1998 by
a majority of the Directors then in office to fill the vacancy created by the
resignation of F. Michael Hruby, for a term expiring in 1999. Joseph L.
Mitchell, a former Class I Director, resigned his directorship effective as of
July 22, 1998. Mr. Mitchell's vacant seat, as well as the other Class I vacant
seat, may be filled by a majority vote of the remaining Directors. The members
of Class II, with a term expiring at the 2000 Annual Meeting of Stockholders,
are Michael G. Salter and Michael R. Bruce. Mr. Bruce was elected in June 1998
by a majority of the Directors then in office to fill the vacancy created by the
resignation of Harold B. Shukovsky, for a term expiring in 2000.
The following table sets forth, with respect to the current members of the
Board of Directors and management of the Company, (i) 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, and (iii)
the names of certain other companies of which such person currently serves as a
director or executive officer.
<TABLE>
<CAPTION>
POSITION AND OFFICES WITH THE COMPANY
NAME AGE AND OTHER BUSINESS EXPERIENCE DURING LAST FIVE YEARS
- --------------------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Raymond W. Leclerc..................... 72 Mr. Leclerc was elected a Director in October 1995. He is the
founder of Ray Plastic, Inc. (1950) and Mylec, Inc. (1970). He
was President and Chief Executive Officer for both firms from
inception until his retirement in 1989. He continues as a
director in both companies.
Michael G. Salter...................... 61 Mr. Salter was elected a Director in June 1997. He most recently
served as Vice President/General Manager, Asia Pacific of EMC
Corporation and President of EMC Japan. He is currently acting as
a consultant to companies in the data storage industry.
Gregory Scorziello..................... 37 Mr. Scorziello was appointed a Director in March 1998. He was
appointed President and Chief Executive Oficer of the Company in
April 1998. Mr. Scorziello was Senior Vice President of Worldwide
Operations for Storage Computer from 1997 to February 1998 and
prior to that was Storage Computer's Vice President of
International Distribution from 1996 to 1997. From 1984 to 1995,
Mr. Scorziello was employed by EMC Corporation, most recently as
International Regional Distribution Manager.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICES WITH THE COMPANY
NAME AGE AND OTHER BUSINESS EXPERIENCE DURING LAST FIVE YEARS
- --------------------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Michael R. Bruce....................... 60 Mr. Bruce was appointed a Director in June 1998. Mr. Bruce has
been associated with Dataman Software, Inc., a consulting
business specializing in the storage and high technology
industries, since 1993. Mr. Bruce also serves as a director of
AlphaNet Solutions, a publicly traded company, and DXI
Incorporated, a private corporation.
</TABLE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1998 ("Fiscal Year 1998"), the Board
held five (5) meetings. During Fiscal Year 1998, each incumbent director
attended at least 75% 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: Michael G.
Salter and Michael R. Bruce. Responsibilities of this committee include
engagement of independent auditors, review of audit fees, 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, which in Fiscal Year
1998 consisted of Francis S Wyman and Harold B. Shukovsky, met one (1) time
during Fiscal Year 1998.
The Compensation Committee presently is composed of two directors: Michael
G. Salter and Raymond W. Leclerc. 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 plans, 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 1998, the Compensation Committee, which in Fiscal Year 1998 consisted of
Joseph L. Mitchell, Francis S. Wyman, Raymond W. Leclerc and Harold B.
Shukovsky, did not meet.
The Company did not have a Nominating Committee during Fiscal Year 1998, but
on June 11, 1998, a Nominating Committee was appointed by the Board of
Directors. The Nominating Committee presently is composed of three directors:
Raymond W. Leclerc, Michael G. Salter and Michael R. Bruce. The Nominating
Committee is responsible for receiving and recommending to the Board of
Directors the nominees for persons to serve as directors of the Company. The
Nominating Committee will not consider nominees recommended by stockholders of
the Company.
EXECUTIVE OFFICERS
The names of, and certain information regarding, the executive officers of
the Company who are not also directors, are set forth below. The executive
officers serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ---------------------------------------------
<S> <C> <C>
Paul Foskett........................... 36 Vice President of International Sales
Steven Hodge........................... 45 Vice President of Marketing
James Nolan............................ 43 Vice President of Operations
</TABLE>
Mr. Foskett has served as the Company's Vice President of International
Sales since April 1998. Prior to that he was Vice President of Storage Computer
for Western Europe from 1997, Sales Director of
6
<PAGE>
Sunderson Electrons Group from 1996 to 1997 and Worldwide Sales Director and
Sales Manager at EAME from 1994 to 1995 and 1992 to 1994, respectively.
Mr. Hodge has served as the Company's Vice President of Marketing since
April 1998. Prior to that he was a Senior Account Manager for Storage Computer,
U.K., from 1997 to 1998, and Sales and Marketing Manager for Bluepoint Business
Systems, U.K., from 1992 to 1997.
Mr. Nolan has served as the Company's Vice President of Engineering since
April 1998. Prior to that he was Vice President of Engineering for Storage
Computer from 1997 to 1998 and for Electronic Retail Systems International from
1993 to 1997.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by the
following individuals for services rendered to the Company in all capacities
during the Company's last three fiscal years: (i) the Chief Executive Officer of
the Company (the "CEO") as of March 31, 1998, (ii) the former CEO of the Company
and (iii) each of the most highly compensated executive officers of the Company
(other than the CEO) as of March 31, 1998 (including several former officers)
whose salary and bonus earned during fiscal 1998 exceeded $100,000 (all of these
current and former officers are referred to herein collectively as the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS (#) COMPENSATIONS($)(1)
- ----------------------------------------------------------- --------- --------- ------------- -------------------
<S> <C> <C> <C> <C>
Gregory Scorziello(2)...................................... 1998 11,442 0 0
Chief Executive Officer and President
William E. Davis (3)....................................... 1998 200,000 0 110,681
Former Chief Executive Officer and President 1997 200,000 0 4,632
1996 194,100 42,000 5,225
Paul M. O'Brien(4)......................................... 1998 120,000 0 3,181
Former Vice President and Chief Financial Officer 1997 120,000 0 4,500
1996 128,413 27,000 3,809
B. Edward Fitzgibbons(5)................................... 1998 126,560 0 1,883
Former Vice President of Sales 1997 128,654 0 4,473
1996 116,827 16,000 2,388
</TABLE>
- ------------------------
(1) Represents the Company's matching contributions under the Company's 401(k)
Plan for Fiscal Years 1998, 1997, and 1996, and, with regard to Mr. Davis,
includes severance payments payable in fiscal 1999 (See footnote (3)
below.).
(2) Mr. Scorziello joined the Company on February 26, 1998 as acting Chief
Executive Officer and President and assumed the positions of Chief Executive
Officer and President on April 1, 1998. Mr. Scorziello became a member of
the Board of Directors of the Company on March 12, 1998.
7
<PAGE>
(3) Consists of $5,281 in the Company's matching contribution under the
Company's 401(k) plan for Fiscal Year 1998 and $105,400 in severance
payments. Mr. Davis resigned from his positions with the Company, including
his seat on the Board of Directors of the Company, on March 31, 1998. The
Company entered into a separation agreement with Mr. Davis, dated February
20, 1998, under which the Company agreed to pay Mr. Davis an aggregate
amount equal to six months of his current salary ($100,000), payable in nine
equal monthly installments commencing in April 1998 and ending in December
1998. The Company also has agreed to provide Mr. Davis with continued health
insurance coverage during the nine month severance period at an aggregate
cost to the company of $5,400.
(4) Mr. O'Brien resigned from his positions with the Company on March 31, 1998.
(5) Mr. Fitzgibbons left his position with the Company on March 23, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants to the Named Executive Officers in Fiscal Year
1998.
FISCAL YEAR END OPTION VALUES
The following table provides information regarding the number of shares of
Common Stock covered by both exercisable and unexercisable stock options held by
each of the Named Executive Officers as of March 31, 1998 and the values of
"in-the-money" options, which value represents the positive spread between the
exercise price of any such option and the fiscal year-end value of the Company's
Common Stock. There were no option exercises by any of the Named Executive
Officers in Fiscal 1998.
<TABLE>
<CAPTION>
NUMBERS OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE MONEY OPTIONS
AT 3/31/98(#) AT 3/31/98($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ----------------------------------------- ----------------------- --------------------------
<S> <C> <C>
Gregory Scorziello....................... 0/0 0/0
William E. Davis......................... 178,000/0 0/0
Paul M. O'Brien.......................... 133,000/0 87,500/0
B. Edward Fitzgibbons.................... 10,607/0 0/0
</TABLE>
- ------------------------
(1) Value is based on the closing sale price of the Common Stock as of March 31,
1998 ($1.25) minus the exercise price.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Gregory Scorziello
pursuant to which the Company agreed to employ Mr. Scorziello as President and
Chief Executive Officer effective April 1, 1998. Mr. Scorziello will receive a
base salary at an annual rate of $175,000 which will be reviewable by the Board
of Directors annually. Additionally, Mr. Scorziello will receive options to
purchase an aggregate of 1,000,000 shares of Common Stock out of the Company's
1998 Plan (as defined below), which will be exercisable for a period of ten
years and vest, as to 300,000 shares at an exercise price of $1.00 per share in
nine equal monthly installments starting from May 1, 1998, and as to the
remaining 700,000 shares, on March 31, 2005, or earlier as to the following
increments of shares if and when the Company's publicly-traded stock price
reaches or exceeds the following levels, on the basis of the average of the
closing prices for any period of 20 consecutive trading days: (i) 300,000 shares
when the market price equals or exceeds $2.50 per share; (ii) 300,000 shares
when the market price equals or exceeds $5.00 per share; and (iii) 100,000
shares when the market price equals or exceeds $7.50 per share. In the event the
Company is sold in its entirety, all of the remaining non-vested options will
vest upon the closing of such sale. No bonus was paid to Mr. Scorziello in
Fiscal Year 1998.
8
<PAGE>
Pursuant to the terms of the employment agreement, if the Company terminates
Mr. Scorziello's employment other than for "cause" more than 90 days after his
commencement date, then he will receive an amount equal to his 1998 annualized
salary (I.E., $175,000), payable in twelve consecutive equal monthly
installments, subject to normal withholdings at the times normal payroll is
paid. If Mr. Scorziello voluntarily terminates his employment or is terminated
for "cause" (as defined in Mr. Scorziello's employment agreement) at any time,
no severance payments will be payable to him.
The Company is a party to a severance agreement with Mr. William Davis, the
former Chief Executive Officer and President of the Company, which is described
in footnote (3) to the Summary Compensation Table.
DIRECTOR COMPENSATION
Directors are eligible to participate in the 1991 Plan and the 1998 Plan
(together, the "Plans"). The Plans provide for (i) an initial grant upon the
election of a Non-Employee Director to the Board of Directors, and subsequent
grants upon reelection, of a Non-Qualified Option to purchase the number of
shares of Common Stock determined by dividing $25,000 by the fair market price
of the Common Stock on the date of grant, or (ii) a Non-Qualified Option to
purchase a pro-rata number of shares if such director is elected or reelected to
serve less than a three year term. Under the 1991 Plan, any Non-Employee
Director appointed by the Board of Directors would receive on the date of the
next Annual Stockholders' Meeting of the Company a Non-Qualified Option to
purchase a pro rata number of shares based upon the number of years (including
fractions thereof), if any, from the date of appointment until such Non-Employee
Director would stand for re-election to the Board of Directors. Under the 1998
Plan, an initial grant to an appointed Non-Employee Director would be given on
the date of appointment rather than on the date of the next Annual Stockholders'
Meeting. Options granted under the Plans vest immediately on the date of grant.
Options to purchase 12,866 shares were granted under this formula during Fiscal
Year 1998 to Michael Salter. In addition, options to purchase 6,588 shares were
granted to Mr. Salter during Fiscal Year 1998 outside of the formula. No options
were granted during Fiscal Year 1998 to any Named Executive Officers serving on
the Board.
In Fiscal Year 1998, the Company paid non-employee directors $1,000 for
attendance at each meeting of the Board of Directors and $500 for attendance at
each meeting of Board Committees. On July 21, 1998, The Board voted to suspend
such payments beginning with the next Board or Committee meeting. The Board may
resume such payments in the future at its discretion and may consider
retroactive payment of the suspended fees.
Mr. Bruce serves as a consultant to the Company in addition to his
responsibilities as a Director. As consideration for his consulting services,
the Company granted Mr. Bruce an option to purchase 75,000 shares of Common
Stock, at an exercise price of $1.00 per share, vesting in three equal annual
installments beginning on June 1, 1999, and will pay him an annual fee of $8,400
plus expenses. Mr. Salter also serves as a consultant to the Company in addition
to his responsibilities as Chairman of the Board of Directors. As consideration
for his consulting services, the Company, under the previous Chief Executive
Officer, entered into an agreement with Mr. Salter whereby Mr. Salter would
receive 2,500 shares of Common Stock per month. Mr. Salter received 20,000
shares of Common Stock under this arrangement in Fiscal Year 1998 and 10,000
shares of Common Stock in Fiscal 1999. In July 1998, the Board of Directors of
the Company agreed that this arrangement would be canceled by and pursuant to a
new arrangement with Mr. Salter under which Mr. Salter would receive, in
consideration of his further consulting services, 70,000 shares of Common Stock,
subject to the Company's right to repurchase such shares at par value per share
($.01). The Company's right to repurchase may be exercised if Mr. Salter's
services as a consultant cease for certain reasons provided for in his stock
repurchase agreement with the Company. Mr. Salter's rights in these shares vest,
such that the Company's repurchase rights are terminated with respect to a
particular number of shares, according to the following schedule: 20,000 shares
on October 1, 1998, 25,000 shares on January 1, 1999 and 25,000 shares on April
1, 1999.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1998, except that
one report on a Form 5 was inadvertently not filed with regard to two option
grants to Michael G. Salter, a Director of the Company, and one report on Form 4
was inadvertently not filed by Mr. Salter with regard to his purchase of 20,000
shares of the Company's Common Stock in the open market on February 26, 1998.
The appropriate filings for Mr. Salter have been made.
CERTAIN TRANSACTIONS
The Company leases its main facility in Plainville, Massachusetts, from D&K
Realty Trust (the "Trust"). Klaus J. Peter and David R. Lennox, both former
officers and directors of the Company, are the 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 1998 totaled
approximately $83,400 and in the fiscal years ended March 31, 1997 and March 31,
1996 totaled approximately $83,400 per year.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF THE VOTES CAST AT THE
SPECIAL MEETING IN LIEU OF ANNUAL MEETING IS REQUIRED TO ELECT THE NOMINEE FOR
DIRECTOR. THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF MR. LECLERC AS
DIRECTOR, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF
UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
PROPOSAL 2
AMENDMENT OF THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Restated Articles of Organization (the "Articles of
Organization") authorize the issuance of 20,000,000 shares of Common Stock, $.01
par value. On June 11, 1998, the Board of Directors of the Company unanimously
approved an amendment to the Articles of Organization to increase the number of
authorized shares of Common Stock from 20,000,000 to 30,000,000 and to submit
the proposed amendment to the stockholders at the Meeting.
PURPOSE AND EFFECT OF THE AMENDMENT
The general purpose and effect of the proposed amendment to the Company's
Articles of Organization will be to authorize 10,000,000 additional shares of
Common Stock to create a sufficient reserve of shares of Common Stock for future
needs of the Company. The Board of Directors believes that it is prudent to have
the additional shares of Common Stock available for general corporate purposes,
including acquisitions, equity financings, grants of stock options, payment of
stock dividends, stock splits or other recapitalizations.
The Company currently has 20,000,000 authorized shares of Common Stock. As
of July 20, 1998, the Company had 13,333,409 shares issued and outstanding and
6,666,591 shares authorized but unissued.
Except in connection with shares reserved for warrants and options, the
Company currently has no plans, arrangements or understandings for the issuance
of additional shares of Common Stock. However, opportunities for acquisitions
and equity financings could arise at any time. If the Board of Directors deems
it to be in the best interest of the Company and the stockholders to issue
additional shares of
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Common Stock in the future, the Board of Directors generally will not seek
further authorization by vote of the stockholders, unless such authorization is
otherwise required by law or regulations. The proposed amendment would give the
Board of Directors the flexibility to act promptly when it determines that
issuance of additional shares of Common Stock is in the best interest of the
Company.
The increase in the number of authorized shares of Common Stock may have a
dilutive effect on existing stockholders and also could have an anti-takeover
effect. If the Company's Board of Directors desired to issue additional shares
in the future, such issuance could dilute the voting power of a person seeking
control of the Company, thereby deterring or rendering more difficult a merger,
tender offer, proxy contest or an extraordinary corporate transaction opposed by
the Company.
VOTE
The affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Meeting will be required to approve the amendment to the
Company's Articles of Organization increasing the number of authorized shares of
Common Stock from 20,000,000 to 30,000,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE
COMPANY'S RESTATED ARTICLES OF ORGANIZATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM 20,000,000 T0 30,000,000, AND PROXIES SOLICITED BY
THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED
OTHERWISE ON THE PROXY.
PROPOSAL 3
ADOPTION OF THE MEDIA LOGIC, INC.
1998 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
AND THE RESERVATION OF 2,000,000 SHARES OF COMMON STOCK
FOR OPTIONS WHICH MAY BE GRANTED UNDER THE 1998 PLAN
GENERAL
The Company's 1998 Employee, Director and Consultant Stock Option Plan (the
"1998 Plan") was adopted by the Company's Board of Directors on June 11, 1998
with 2,000,000 shares of Common Stock reserved for issuance under the 1998 Plan.
The 1998 Plan provides for the grant of incentive stock options to employees and
the grant of non-qualified stock options to employees and consultants of the
Company on such terms and conditions as may be determined by the Compensation
Committee of the Board of Directors, including the determination of which
employees and consultants are to receive grants of options, exercise price,
number of shares and exercisability under the 1998 Plan. Under the 1998 Plan,
incentive options are granted with exercise prices of no less than the fair
market value of the Common Stock on the date of grant while nonqualified options
may be granted with exercise prices of no less than 85% of the fair market value
of the Common Stock on the date of grant. The 1998 Plan also provides for the
automatic grant of non-qualified options to non-employee directors of the
Company. See "Director Compensation." The 1998 Plan is being submitted for
stockholder approval at the Meeting to ensure qualification of the 1998 Plan
under (i) Section 162(m) of the Internal Revenue code of 1986, as amended (the
"Code"), relating to deductibility by the Company of compensation to certain
executives in excess of $1 million per year, (ii) Section 422 of the Code,
relating to the ability of options granted under the 1998 Plan to be incentive
stock options, and (iii) American Stock Exchange ("AMEX") rules. The Board
believes that the adoption of the 1998 Plan is advisable to give the Company the
flexibility needed to attract, retain and motivate employees, directors and
consultants. All employees, directors and consultants of the Company are
eligible to participate in the 1998 Plan.
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MATERIAL FEATURES OF THE 1998 PLAN
The purpose of the 1998 Plan is to attract, retain and motivate employees,
directors and consultants through the issuance of stock options and to encourage
ownership of shares of Common Stock by employees, directors and consultants of
the Company. The 1998 Plan is administered by the Compensation Committee.
Subject to the provisions of the 1998 Plan, the Compensation Committee
determines the persons to whom options will be granted, the number of shares to
be covered by each option and the terms and conditions upon which an option may
be granted, and has the authority to administer the provisions of the 1998 Plan.
All employees, directors and consultants of the Company and its affiliates
(approximately 35 people) are eligible to participate in the 1998 Plan.
Options granted under the 1998 Plan may be either (i) options intended to
qualify as "incentive stock options" under Section 422 of the Code, or (ii)
non-qualified stock options. Incentive stock options may be granted under the
1998 Plan to employees of the Company and its affiliates. Non-qualified stock
options may be granted to consultants, directors and employees of the Company
and its affiliates. The 1998 Plan provides for (i) an initial grant upon the
election of a Non-Employee Director to the Board of Directors, and subsequent
grants upon reelection, of a Non-Qualified Option to purchase the number of
shares of Common Stock determined by dividing $25,000 by the fair market price
of the Common Stock on the date of grant, or (ii) a Non-Qualified Option to
purchase a pro rata number 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 appointment a Non-Qualified
Option to purchase a pro rata number of shares based upon the number of years
(including fractions thereof), if any, from the date of appointment until such
Non-Employee Director stands for re-election to the Board of Directors. Options
granted under the Plans vest immediately on the date of grant.
The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to incentive stock options which become exercisable in any
calendar year under any incentive stock option granted under the 1998 Plan may
not exceed $100,000. Incentive stock options granted under the 1998 Plan may not
be granted at a price less than the fair market value of the Common Stock on the
date of grant, or 110% of fair market value in the case of options granted to an
employee holding 10% or more of the voting stock of the Company. Non-qualified
stock options granted under the 1998 Plan may not be granted at an exercise
price less than 85% of the fair market value of the Common Stock on the date of
grant. Incentive stock options granted under the 1998 Plan expire not more than
ten years from the date of grant, or not more than five years from the date of
grant in the case of incentive stock options granted to an employee holding 10%
or more of the voting stock of the Company. An option granted under the 1998
Plan is exercisable, during the optionholder's lifetime, only by the
optionholder and is not transferable by him or her except by will or by the laws
of descent and distribution.
An incentive stock option granted under the 1998 Plan may, at the
Compensation Committee's discretion, be exercised after the termination of the
optionholder's employment with the Company (other than by reason of death,
disability or termination for cause as defined in the 1998 Plan) to the extent
exercisable on the date of such termination, at any time prior to the earlier of
the option's specified expiration date or 90 days after such termination. In
granting any non-qualified stock option, the Compensation Committee may specify
that such non-qualified stock option shall be subject to such termination or
cancellation provisions as the Compensation Committee shall determine. In the
event of the optionholder's death or disability, both incentive stock options
and non-qualified stock options generally may be exercised, to the extent
exercisable on the date of death or disability (plus a pro rata portion of the
option if the option vests periodically), by the optionholder or the
optionholder's survivors at any time prior to the earlier of the option's
specified expiration date or one year from the date of the optionholder's death
or disability. Generally, in the event of the optionholder's termination for
cause, all outstanding and unexercised options are forfeited.
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If the shares of Common Stock shall be subdivided or combined into a greater
or smaller number of shares or if the Company shall issue any shares of Common
Stock as a stock dividend on its outstanding Common Stock, the number of shares
of Common Stock deliverable upon the exercise of an option granted under the
1998 Plan shall be appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"), the
Compensation Committee or the Board of Directors of any entity assuming the
obligations of the Company under the 1998 Plan (the "Successor Board"), shall,
as to outstanding options under the 1998 Plan either (i) make appropriate
provision for the continuation of such options by substituting on an equitable
basis for the shares then subject to such options the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Acquisition or securities of the successor or acquiring entity; or (ii) upon
written notice to the participants, provide that all options must be exercised
(either to the extent then exercisable or, at the discretion of the Compensation
Committee, all options being made fully exercisable for purposes of such
transaction) within a specified number of days of the date of such notice, at
the end of which period the options shall terminate; or (iii) terminate all
options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to each such option (either to the extent then
exercisable or, at the discretion of the Compensation Committee, all options
being made fully exercisable for purposes of such transaction) over the exercise
price thereof. In the event of a recapitalization or reorganization of the
Company (other than an Acquisition) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionholder upon exercising an option under the 1998 Plan,
shall be entitled to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had exercised such option
prior to such recapitalization or reorganization.
The 1998 Plan may be amended by the stockholders of the Company. The 1998
Plan may also be amended by the Board of Directors or the Compensation
Committee, provided that any amendment approved by the Board of Directors or the
Compensation Committee which is of a scope that requires stockholder approval in
order to ensure favorable federal income tax treatment for any incentive stock
options under Code Section 422, is subject to obtaining such stockholder
approval.
Under the 1998 Plan, 1,000,000 shares will be issuable upon the exercise of
options granted to Gregory Scorziello, the President and Chief Executive Officer
of the Company. These options, which will be exercisable for a period of ten
years, vest as to 300,000 shares at an exercise price of $1.00 per share, the
market price of the Common Stock on the date of grant, in nine equal monthly
installments starting from May 1, 1998, and as to the remaining 700,000 shares,
on March 31, 2005, or earlier as to the following increments of shares if and
when the Company's publicly-traded stock price reaches or exceeds the following
levels, on the basis of the average of the closing prices for any period of 20
consecutive trading days: (i) 300,000 shares when the market price equals or
exceeds $2.50 per share; (ii) 300,000 shares when the market price equals or
exceeds $5.00 per share; and (iii) 100,000 shares when the market price equals
or exceeds $7.50 per share. In the event the Company is sold in its entirety,
all of the remaining non-vested options will vest upon the closing of such sale.
Pursuant to AMEX Rules, shares reserved for issuance pursuant to the options
granted to Mr. Scorziello can be listed on the AMEX only if the plan under which
the options were granted is ratified by the stockholders of the Company. If the
1998 Plan is not ratified, the grant of the options to Mr. Scorziello under the
1998 Plan will become null and void and of no effect. On August 4, 1998, the
closing market price per share of the Company's Common Stock was $1.00, as
reported on the AMEX.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of certain U.S. federal income tax
consequences of the issuance and exercise of options under the 1998 Plan:
INCENTIVE STOCK OPTIONS. An incentive stock option does not result in
taxable income to the optionee or deduction to the Company at the time it is
granted or exercised, provided that no disposition is made by the optionee of
the shares acquired pursuant to the option within two years after the date of
grant of the option nor within one year after the date of issuance of shares to
him (the "ISO holding period"). However, the difference between the fair market
value of the shares on the date of exercise and the option price will be an item
of tax preference includible in "alternative minimum taxable income." Upon
disposition of the shares after the expiration of the ISO holding period, the
optionee will generally recognize long term capital gain or loss based on the
difference between the disposition proceeds and the option price paid for the
shares. If the shares are disposed of prior to the expiration of the ISO holding
period, the optionee generally will recognize taxable compensation, and the
Company will have a corresponding deduction, in the year of the disposition,
equal to the excess of the fair market value of the shares on the date of
exercise of the option over the option price. Any additional gain realized on
the disposition will normally constitute capital gain. If the amount realized
upon such a disqualifying disposition is less than fair market value of the
shares on the date of exercise, the amount of compensation income will be
limited to the excess of the amount realized over the optionee's adjusted basis
in the shares.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified option will not
result in taxable income to the optionee or deduction to the Company at the time
of grant. The optionee will recognize taxable compensation, and the Company will
have a corresponding deduction, at the time of exercise in the amount of the
excess of the then fair market value of the shares acquired over the option
price. Upon disposition of the shares, the optionee will generally realize
capital gain or loss, and his basis for determining gain or loss will be the sum
of the option price paid for the shares plus the amount of compensation income
recognized on exercise of the option.
The affirmative vote of a majority of the total number of shares voted
affirmatively or negatively at the Meeting is required to approve the adoption
of the 1998 Plan and the reservation of 2,000,000 shares of Common Stock for
options which may be granted under the 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ADOPTION OF THE 1998 PLAN
AND THE RESERVATION OF 2,000,000 SHARES OF COMMON STOCK FOR OPTIONS WHICH MAY BE
GRANTED UNDER THE 1998 PLAN, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN
FAVOR OF THE 1998 PLAN UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE
PROXY.
PROPOSAL 4
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, will have the opportunity
to make a statement if he or she desires to do so, and will be available to
answer any appropriate questions.
The Board of Directors recommends that the stockholders 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 stockholders,
the Board of Directors will make another appointment to be effective at the
earliest possible time.
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STOCKHOLDER PROPOSALS
The Board will make provision for presentation of proposals by stockholders
at the 1999 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 April 8, 1999, to be
considered for inclusion to the Company's proxy materials relating to that
meeting. Stockholders who do not wish to include their proposals in such proxy
materials but who wish to present proposals at the Company's 1999 Annual Meeting
of Stockholders (or special meeting in lieu thereof) must notify the Clerk of
the Company in writing at the Company's principal executive offices no later
than June 22, 1999 in order for their proposals to be considered timely for
purposes of Rule 14a-4 under the Securities Exchange Act of 1934, as amended.
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.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998 (other than exhibits thereto) filed with the Securities and
Exchange Commission, which provides additional information about the Company,
may be obtained by any stockholder without charge at their request by writing
to:
Investor Relations
Media Logic, Inc.
310 South Street
Plainville, Massachusetts 02762
[LOGO]
Gregory Scorziello
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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APPENDIX A
MEDIA LOGIC, INC.
1998 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires,
the following terms, as used in this MEDIA LOGIC, INC. 1998 Employee,
Director and Consultant Stock Option Plan, have the following meanings:
Administrator means the Board of Directors, unless it has
delegated power to act on its behalf to the Committee, in
which case the Administrator means the Committee.
Affiliate means a corporation which, for purposes of Section
424 of the Code, is a parent or subsidiary of the Company,
direct or indirect.
Board of Directors means the Board of Directors of the
Company.
Code means the United States Internal Revenue Code of 1986, as
amended.
Committee means the committee of the Board of Directors to
which the Board of Directors has delegated power to act under
or pursuant to the provisions of the Plan.
Common Stock means shares of the Company's common stock, $.01
par value per share.
Company means MEDIA LOGIC, INC., a Massachusetts corporation.
Disability or Disabled means permanent and total disability as
defined in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national securities
exchange or traded in the over-the-counter market and sales
prices are regularly reported for the Common Stock, the
closing or last price of the Common Stock on the Composite
<PAGE>
Tape or other comparable reporting system for the trading day
immediately preceding the applicable date;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if
sales prices are not regularly reported for the Common Stock
for the trading day referred to in clause (1), and if bid and
asked prices for the Common Stock are regularly reported, the
mean between the bid and the asked price for the Common Stock
at the close of trading in the over-the-counter market for the
trading day on which Common Stock was traded immediately
preceding the applicable date; and
(3) If the Common Stock is neither listed on a national
securities exchange nor traded in the over-the-counter market,
such value as the Administrator, in good faith, shall
determine.
ISO means an option meant to qualify as an incentive stock
option under Section 422 of the Code.
Key Employee means an employee of the Company or of an
Affiliate (including, without limitation, an employee who is
also serving as an officer or director of the Company or of an
Affiliate), designated by the Administrator to be eligible to
be granted one or more Options under the Plan.
Non-Qualified Option means an option which is not intended to
qualify as an ISO.
Option means an ISO or Non-Qualified Option granted under the
Plan.
Option Agreement means an agreement between the Company and a
Participant delivered pursuant to the Plan, in such form as
the Administrator shall approve.
Participant means a Key Employee, director or consultant to
whom one or more Options are granted under the Plan. As used
herein, "Participant" shall include "Participant's Survivors"
where the context requires.
Plan means this MEDIA LOGIC, INC. 1998 Employee, Director and
Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which Options
have been or may be granted under the Plan or any shares of
capital stock into which the Shares are changed or for which
they are exchanged within the provisions of Paragraph 3 of the
Plan. The Shares issued upon exercise of Options granted under
the Plan may be authorized and unissued shares or shares held
by the Company in its treasury, or both.
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Survivors means a deceased Participant's legal representatives
and/or any person or persons who acquired the Participant's
rights to an Option by will or by the laws of descent and
distribution.
2. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees
and directors of and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the granting of ISOs and
Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
The number of Shares which may be issued from time to time pursuant to
this Plan shall be 2,000,000, or the equivalent of such number of Shares after
the Administrator, in its sole discretion, has interpreted the effect of any
stock split, stock dividend, combination, recapitalization or similar
transaction in accordance with Paragraph 16 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, the
Shares which were subject to such Option shall be available for the granting of
other Options under the Plan. Any Option shall be treated as "outstanding" until
such Option is exercised in full, or terminates or expires under the provisions
of the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
The Administrator of the Plan will be the Board of Directors, except to
the extent the Board of Directors delegates its authority to the Committee, in
which case the Committee shall be the Administrator.
Subject to the provisions of the Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option or
Option Agreement and to make all rules and determinations
which it deems necessary or advisable for the administration
of the Plan;
b. Determine which employees of the Company or of an Affiliate
shall be designated as Key Employees and which of the Key
Employees, directors and consultants shall be granted Options;
c. Determine the number of Shares for which an Option or Options
shall be granted, provided, however, that in no event shall
Options to purchase more than 2,000,000 Shares be granted to
any Participant in any fiscal year ; and
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d. Specify the terms and conditions upon which an Option or
Options may be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the Participants
in the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time an Option
is granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of an Option to a person not then an employee, director or consultant of
the Company or of an Affiliate; provided, however, that the actual grant of such
Option shall be conditioned upon such person becoming eligible to become a
Participant at or prior to the time of the delivery of the Option Agreement
evidencing such Option. ISOs may be granted only to Key Employees. Non-Qualified
Options may be granted to any Key Employee, director or consultant of the
Company or an Affiliate. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him or her from,
participation in any other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such terms and conditions, consistent with the terms and
conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.
A. Non-Qualified Options: Each Option intended to be a
Non-Qualified Option shall be subject to the terms and
conditions which the Administrator determines to be
appropriate and in the best interest of the Company, subject
to the following minimum standards for any such Non-Qualified
Option:
a. Option Price: Each Option Agreement shall state the
option price (per share) of the Shares covered by
each Option, which option price shall be determined
by the Administrator but shall not be less than
85% of the fair market value of the Common Stock on
the date of grant.
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b. Each Option Agreement shall state the number of
Shares to which it pertains;
c. Each Option Agreement shall state the date or dates
on which it first is exercisable and the date after
which it may no longer be exercised, and may provide
that the Option rights accrue or become exercisable
in installments over a period of months or years, or
upon the occurrence of certain conditions or the
attainment of stated goals or events; and
d. Exercise of any Option may be conditioned upon the
Participant's execution of a Share purchase agreement
in form satisfactory to the Administrator providing
for certain protections for the Company and its other
shareholders, including requirements that:
i. The Participant's or the Participant's
Survivors' right to sell or transfer
the Shares may be restricted; and
ii. The Participant or the Participant's
Survivors may be required to execute letters
of investment intent and must also
acknowledge that the Shares will bear
legends noting any applicable restrictions.
e. Directors' Options:
Each director of the Company who is not an
employee of the Company or any Affiliate, who is
elected to the Board of Directors by the stockholders
of the Company, upon such election, shall be granted
a Non-Qualified Option to purchase the number of
Shares determined by dividing $25,000 by the fair
market value of a share of Common Stock as of the
date of grant, or an option to purchase a pro rata
number of Shares if such director is elected or
reelected to serve less than a three-year term. Each
director of the Company who is not an employee of the
Company or any Affiliate, who is reelected to the
Board of Directors by the stockholders of the
Company, upon such reelection, provided that on such
date such director has been in the continued and
uninterrupted service of the Company as a director
since his or her initial election and that such
director is a director of the Company and not an
employee of the Company at such times, shall be
granted a Non-Qualified Option to purchase the number
of Shares determined by dividing $25,000 by the fair
market value of a share of Common Stock as of the
date of grant, or an option to purchase a pro rata
number 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 Non-Qualified Option
to purchase a pro rata number of
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Shares based upon the number of years, if any, until
such non-employee director will stand for reelection
to the Board of Directors.
Each such Option shall (i) have an exercise
price equal to the Fair Market Value (per share) of
the Shares on the date of grant of the Option, (ii)
have a term of ten (10) years, and (iii) shall be
fully exercisable on the date of grant. Any director
entitled to receive an Option grant under this
subparagraph may elect to decline the Option.
Except as otherwise provided in the pertinent Option Agreement, if a
director who received Options pursuant to this subparagraph (e):
i. ceases to be a member of the Board of
Directors for any reason other than death or
Disability, any then unexercised Options
granted to such director may be exercised by
the director within a period of ninety (90)
days after the date the director ceases to
be a member of the Board of Directors, but
only to the extent of the number of shares
with respect to which the Options are
exercisable on the date the director ceases
to be a member of the Board of Directors,
and in no event later than the expiration
date of the Option; or
ii. ceases to be a member of the Board of
Directors of the Company by reason of his or
her death or Disability, any then
unexercised Options granted to such director
may be exercised by the director (or by the
director's personal representative, or
director's Survivors in the event of death)
within a period of one hundred eighty (180)
days after the date the director ceases to
be a member of the Board of Directors, but
only to the extent of the number of Shares
with respect to which the Options are
exercisable on the date the director ceases
to be a member of the Board of Directors,
and in no event later than the expiration
date of the Option.
B. ISOs: Each Option intended to be an ISO shall be issued only
to a Key Employee and be subject to the following terms and
conditions, with such additional restrictions or changes as
the Administrator determines are appropriate but not in
conflict with Section 422 of the Code and relevant regulations
and rulings of the Internal Revenue Service:
a. Minimum standards: The ISO shall meet the minimum
standards required of Non-Qualified Options, as
described in Paragraph 6(A) above, except clauses (a)
and (e) thereunder.
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b. Option Price: Immediately before the Option is
granted, if the Participant owns, directly or by
reason of the applicable attribution rules in Section
424(d) of the Code:
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price per share of the
Shares covered by each Option shall not be
less than one hundred percent (100%) of the
Fair Market Value per share of the Shares on
the date of the grant of the Option.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
stock of the Company or an Affiliate, the
Option price per share of the Shares covered
by each Option shall not be less than one
hundred ten percent (110%) of the said Fair
Market Value on the date of grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, each Option shall terminate not
more than ten (10) years from the date of
the grant or at such earlier time as the
Option Agreement may provide.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
stock of the Company or an Affiliate, each
Option shall terminate not more than five
(5) years from the date of the grant or at
such earlier time as the Option Agreement
may provide.
d. Limitation on Yearly Exercise: The Option Agreements
shall restrict the amount of Options which may be
exercisable in any calendar year (under this or any
other ISO plan of the Company or an Affiliate) so
that the aggregate Fair Market Value (determined at
the time each ISO is granted) of the stock with
respect to which ISOs are exercisable for the first
time by the Participant in any calendar year does not
exceed one hundred thousand dollars ($100,000),
provided that this subparagraph (d) shall have no
force or effect if its inclusion in the Plan is not
necessary for Options issued as ISOs to qualify as
ISOs pursuant to Section 422(d) of the Code.
7. EXERCISE OF OPTIONS AND ISSUE OF SHARES.
An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is
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being exercised, and upon compliance with any other condition(s) set forth in
the Option Agreement. Such written notice shall be signed by the person
exercising the Option, shall state the number of Shares with respect to which
the Option is being exercised and shall contain any representation required by
the Plan or the Option Agreement. Payment of the purchase price for the Shares
as to which such Option is being exercised shall be made (a) in United States
dollars in cash or by check, or (b) at the discretion of the Administrator,
through delivery of shares of Common Stock having a Fair Market Value equal as
of the date of the exercise to the cash exercise price of the Option, or (c) at
the discretion of the Administrator, by having the Company retain from the
shares otherwise issuable upon exercise of the Option, a number of shares having
a Fair Market Value equal as of the date of exercise to the exercise price of
the Option, or (d) at the discretion of the Administrator, by delivery of the
grantee's personal recourse note bearing interest payable not less than annually
at no less than 100% of the applicable Federal rate, as defined in Section
1274(d) of the Code, or (e) at the discretion of the Administrator, in
accordance with a cashless exercise program established with a securities
brokerage firm, and approved by the Administrator, or (f) at the discretion of
the Administrator, by any combination of (a), (b), (c), (d) and (e) above.
Notwithstanding the foregoing, the Administrator shall accept only such payment
on exercise of an ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to
which such Option was exercised to the Participant (or to the Participant's
Survivors, as the case may be). In determining what constitutes "reasonably
promptly," it is expressly understood that the delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation (including,
without limitation, state securities or "blue sky" laws) which requires the
Company to take any action with respect to the Shares prior to their issuance.
The Shares shall, upon delivery, be evidenced by an appropriate certificate or
certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Administrator shall
not accelerate the exercise date of any installment of any Option granted to any
Key Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.
The Administrator may, in its discretion, amend any term or condition
of an outstanding Option provided (i) such term or condition as amended is
permitted by the Plan, (ii) any such amendment shall be made only with the
consent of the Participant to whom the Option was granted, or in the event of
the death of the Participant, the Participant's Survivors, if the amendment is
adverse to the Participant, and (iii) any such amendment of any ISO shall be
made only after the Administrator, after consulting the counsel for the Company,
determines whether such amendment would constitute a "modification" of any
Option which is an ISO (as that term is defined in Section 424(h) of the Code)
or would cause any adverse tax consequences for the holder of such ISO.
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8. RIGHTS AS A SHAREHOLDER.
No Participant to whom an Option has been granted shall have rights as
a shareholder with respect to any Shares covered by such Option, except after
due exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
By its terms, an Option granted to a Participant shall not be
transferable by the Participant other than (i) by will or by the laws of descent
and distribution, or (ii) as otherwise determined by the Administrator and set
forth in the applicable Option Agreement. The designation of a beneficiary of an
Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided above, an Option shall be exercisable, during the
Participant's lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon an Option, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH OR
DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate (for any reason
other than termination "for cause", Disability, or death for
which events there are special rules in Paragraphs 11, 12, and
13, respectively), may exercise any Option granted to him or
her to the extent that the Option is exercisable on the date
of such termination of service, but only within such term as
the Administrator has designated in the pertinent Option
Agreement.
b. Except as provided in Subparagraph (c) below, or Paragraph 12
or 13, in no event may an Option Agreement provide, if the
Option is intended to be an ISO, that the time for exercise be
later than three (3) months after the Participant's
termination of employment.
c. The provisions of this Paragraph, and not the provisions of
Paragraph 12 or 13, shall apply to a Participant who
subsequently becomes Disabled or dies after the
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termination of employment, director status or consultancy,
provided, however, in the case of a Participant's Disability
or death within three (3) months after the termination of
employment, director status or consultancy, the Participant or
the Participant's Survivors may exercise the Option within one
(1) year after the date of the Participant's termination of
employment, but in no event after the date of expiration of
the term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent
to a Participant's termination of employment, termination of
director status or termination of consultancy, but prior to
the exercise of an Option, the Board of Directors determines
that, either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which would
constitute "cause", then such Participant shall forthwith
cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the
Plan who is absent from work with the Company or with an
Affiliate because of temporary disability (any disability
other than a permanent and total Disability as defined in
Paragraph 1 hereof), or who is on leave of absence for any
purpose, shall not, during the period of any such absence, be
deemed, by virtue of such absence alone, to have terminated
such Participant's employment, director status or consultancy
with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
f. Except as required by law or as set forth in the pertinent Option
Agreement, Options granted under the Plan shall not be affected by
any change of a Participant's status within or among the Company
and any Affiliates, so long as the Participant continues to be an
employee, director or consultant of the Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the time the
Participant is notified his or her service is terminated "for
cause" will immediately be forfeited.
b. For purposes of this Plan, "cause" shall include (and is not
limited to) dishonesty with respect to the Company or any
Affiliate, insubordination, substantial malfeasance or
non-feasance of duty, unauthorized disclosure of confidential
information, and conduct substantially prejudicial to the
business of the Company or any Affiliate. The determination of
the Administrator as to the existence of "cause" will be
conclusive on the Participant and the Company.
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<PAGE>
c. "Cause" is not limited to events which have occurred prior to
a Participant's termination of service, nor is it necessary
that the Administrator's finding of "cause" occur prior to
termination. If the Administrator determines, subsequent to a
Participant's termination of service but prior to the exercise
of an Option, that either prior or subsequent to the
Participant's termination the Participant engaged in conduct
which would constitute "cause," then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the
Company or an Affiliate, which contains a conflicting
definition of "cause" for termination and which is in effect
at the time of such termination, shall supersede the
definition in this Plan with respect to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent exercisable but not exercised on the date of
Disability; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights as would have accrued had the Participant
not become Disabled prior to the end of the accrual period
which next ends following the date of Disability. The
proration shall be based upon the number of days of such
accrual period prior to the date of Disability.
A Disabled Participant may exercise such rights only within the period
ending one (1) year after the date of the Participant's termination of
employment, directorship or consultancy, as the case may be, notwithstanding
that the Participant might have been able to exercise the Option as to some or
all of the Shares on a later date if the Participant had not become disabled and
had continued to be an employee, director or consultant or, if earlier, within
the originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.
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13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant while the Participant is an employee,
director or consultant of the Company or of an Affiliate, such Option may be
exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of
death; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights which would have accrued had the Participant
not died prior to the end of the accrual period which next
ends following the date of death. The proration shall be based
upon the number of days of such accrual period prior to the
Participant's death.
If the Participant's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within one (1) year after the
date of death of such Participant, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of the Shares on a later date
if he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the
particular exercise of an Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the "1933
Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise(s) such Option shall warrant to the
Company, prior to the receipt of such Shares, that such
person(s) are acquiring such Shares for their own respective
accounts, for investment, and not with a view to, or for sale
in connection with, the distribution of any such Shares, in
which event the person(s) acquiring such Shares shall be bound
by the provisions of the following legend which shall be
endorsed upon the certificate(s) evidencing their Shares
issued pursuant to such exercise or such grant:
"The shares represented by this certificate have been
taken for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be
effective under the Securities Act of 1933, as
amended, or (b) the Company shall have received an
opinion of counsel satisfactory to it that an
exemption from registration under such Act is then
available, and (2) there shall have been compliance
with all applicable state securities laws."
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b. At the discretion of the Administrator, the Company shall have
received an opinion of its counsel that the Shares may be
issued upon such particular exercise in compliance with the
1933 Act without registration thereunder.
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the Option is exercisable as of the date immediately prior to
such dissolution or liquidation.
16. ADJUSTMENTS.
Upon the occurrence of any of the following events, a Participant's
rights with respect to any Option granted to him or her hereunder which has not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the pertinent Option Agreement:
A. Stock Dividends and Stock Splits. If (i) the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of
shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets
are distributed with respect to such shares of Common Stock, the number of
shares of Common Stock deliverable upon the exercise of such Option may be
appropriately increased or decreased proportionately, and appropriate
adjustments may be made in the purchase price per share to reflect such
events. If a formula grant and/or 162(m) per person cap is included in the
Plan: The number of Shares subject to options to be granted to directors
pursuant to Paragraph 6(A)(e) and the number of Shares subject to the
limitation in Paragraph 4(c) shall also be proportionately adjusted upon the
occurrence of such events.
B. Consolidations or Mergers. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"),
the Administrator or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
Shares then subject to such Options either the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Acquisition or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that all Options must be
exercised (either to the extent then exercisable or, at the discretion of the
Administrator, all Options being made fully exercisable for purposes of this
Subparagraph), within a specified number of days of the date of such notice,
at the end of which
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period the Options shall terminate; or (iii) terminate all Options in exchange
for a cash payment equal to the excess of the Fair Market Value of the shares
subject to such Options (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph) over the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in Subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, a Participant upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities which
would have been received if such Option had been exercised prior to such
recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to Subparagraph A, B or C with respect to ISOs shall
be made only after the Administrator, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Administrator determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments, unless the holder of an ISO specifically requests in writing that
such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.
17. ISSUANCES OF SECURITIES.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in
its discretion take such actions as may be necessary to convert such
Participant's ISOs (or any portions thereof) that
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have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
Participant is an employee of the Company or an Affiliate at the time of such
conversion. Such actions may include, but not be limited to, extending the
exercise period or reducing the exercise price of the appropriate installments
of such Options. At the time of such conversion, the Administrator (with the
consent of the Participant) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Administrator in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any Participant the right to
have such Participant's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Administrator takes appropriate
action. The Administrator, with the consent of the Participant, may also
terminate any portion of any ISO that has not been exercised at the time of such
conversion.
20. WITHHOLDING.
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Participant's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 21), the Company may withhold from the Participant's compensation, if
any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the
amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock or a promissory note,
is authorized by the Administrator (and permitted by law). For purposes hereof,
the fair market value of the shares withheld for purposes of payroll withholding
shall be determined in the manner provided in Paragraph 1 above, as of the most
recent practicable date prior to the date of exercise. If the fair market value
of the shares withheld is less than the amount of payroll withholdings required,
the Participant may be required to advance the difference in cash to the Company
or the Affiliate employer. The Administrator in its discretion may condition the
exercise of an Option for less than the then Fair Market Value on the
Participant's payment of such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Key Employee who receives an ISO must agree to notify the Company
in writing immediately after the Key Employee makes a Disqualifying Disposition
of any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
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22. TERMINATION OF THE PLAN.
The Plan will terminate on June 11, 2008, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
by the shareholders of the Company. The Plan may be terminated at an earlier
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination shall not affect any Option Agreements executed prior
to the effective date of such termination.
23. AMENDMENT OF THE PLAN AND AGREEMENTS.
The Plan may be amended by the shareholders of the Company. The Plan
may also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers. Any amendment approved by the Administrator which
the Administrator determines is of a scope that requires shareholder approval
shall be subject to obtaining such shareholder approval. Any modification or
amendment of the Plan shall not, without the consent of a Participant, adversely
affect his or her rights under an Option previously granted to him or her. With
the consent of the Participant affected, the Administrator may amend outstanding
Option Agreements in a manner which may be adverse to the Participant but which
is not inconsistent with the Plan. In the discretion of the Administrator,
outstanding Option Agreements may be amended by the Administrator in a manner
which is not adverse to the Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement shall be deemed to prevent
the Company or an Affiliate from terminating the employment, consultancy or
director status of a Participant, nor to prevent a Participant from terminating
his or her own employment, consultancy or director status or to give any
Participant a right to be retained in employment or other service by the Company
or any Affiliate for any period of time.
25. GOVERNING LAW.
This Plan shall be construed and enforced in accordance with the law of
The Commonwealth of Massachusetts.
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MEDIA LOGIC, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD SEPTEMBER 10, 1998
The undersigned hereby appoints Gregory Scorziello or John T. Loughran or
either of them as Proxies, with full power of substitution to vote all the
shares of common stock which the undersigned would be entitled to vote if
personally present at the Special Meeting in Lieu of Annual Meeting of
Stockholders to be held on September 10, 1998 at 10:00 a.m. at the Holiday Inn
located at 31 Hampshire Street, Mansfield, Massachusetts, or any adjournment
thereof, and upon any and all matters which may properly be brought before the
meeting or any adjournments thereof, hereby revoking all former proxies.
The Board of Directors recommends a vote for Proposals 1, 2, 3 and 4.
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<CAPTION>
1. Election of one Class III director.
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FOR WITHHOLD
AUTHORITY
Raymond W. Leclerc / / / /
Proposal to approve an amendment to the Company's
2. Restated Articles of Organization to increase the number
of authorized shares of Common Stock from 20,000,000
shares to 30,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
Proposal to approve the adoption of the Media Logic, Inc.
3. 1998 Employee, Director and Consultant Stock Option Plan
and the reservation of 2,000,000 shares of Common Stock
for options which may be granted under the 1998 Plan.
FOR AGAINST ABSTAIN
/ / / / / /
4. Proposal to ratify the appointment of Arthur Andersen LLP
as the independent public accountants of the Company.
FOR AGAINST ABSTAIN
/ / / / / /
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In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting or any adjournment thereof, including but not
5. limited to the adjournment of the meeting for purposes of
soliciting additional proxies to achieve a quorum or to
obtain an affirmative vote on a proposal.
FOR AGAINST ABSTAIN
/ / / / / /
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The shares represented by this proxy will be voted on Proposals (1), (2),
(3), (4) and (5) in accordance with the specifications made and "FOR" such
proposals if there is no specification.
Date ________________________, 1998
___________________________________
Signature of Shareholder
___________________________________
Signature of Shareholder
Please date and sign exactly as
your name(s) appears below
indicating, where proper, official
position or representation capacity
in which you are signing. When
signing as executor, administrator,
trustee or guardian, give full
title as such; when shares have
been issued in the name of two or
more persons, all should sign.
