<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
[ X ] Filed by the Registrant
[ ] 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
BITSTREAM 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)(4) 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 is
determined): ____________________________
4) Proposed maximum aggregate value of transaction: __________________
5) Total fee paid: ___________________________________________________
[ ] 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) Dated Filed: ______________________________________________________
<PAGE> 2
BITSTREAM INC.
215 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997
---------------------------
NOTICE IS HEREBY GIVEN to the stockholders of BITSTREAM INC., a
Delaware corporation (the "Company"), that the Annual Meeting of Stockholders
(the "Meeting") will be held at the Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts 02142 at 10:00 a.m., Eastern Daylight Time, on May 28,
1997 for the following purposes:
1. To elect a board of four (4) directors to serve until the next
Annual Meeting of Stockholders or until their respective successors are elected
and qualified;
2. To approve and ratify the adoption of the Company's 1997 Stock Plan;
and
3. To transact such other and further business as may properly come
before the Meeting or any postponement or adjournment thereof.
Only stockholders of record at the close of business on April 10, 1997
are entitled to notice of and to vote at the Meeting or any adjournment thereof.
The stock transfer books of the Company will not be closed.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1996 accompanies this notice.
By Order of the Board of Directors,
C. RAYMOND BOELIG
Chairman of the Board
Cambridge, Massachusetts
April 28, 1997
RETURN OF PROXIES
A Proxy and self-addressed envelope are enclosed for your use. Whether or
not you plan to attend the meeting, the Board of Directors of the Company
requests that you execute and return your proxy in the enclosed envelope in
order that your shares will be represented at the meeting.
<PAGE> 3
BITSTREAM INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy ("Proxy") is solicited by the Board of Directors (the
"Board") of Bitstream Inc., a Delaware corporation (the "Company"), for use at
the Company's Annual Meeting of Stockholders (the "Meeting") to be held at the
Royal Sonesta Hotel, 5 Cambridge Parkway, Cambridge, Massachusetts 02142 on May
28, 1997, at 10:00 a.m., Eastern Daylight Time. Any stockholder giving a Proxy
has the power to revoke it at any time before it is voted by executing another
Proxy bearing a later date or by giving written notice of revocation to the
Company addressed to the Assistant Secretary prior to the Meeting or by oral or
written notice at the Meeting.
The mailing address of the Company's principal executive office is 215
First Street, Cambridge, Massachusetts 02142, Telephone No. (617) 497-6222. The
approximate date on which this Proxy Statement and form of Proxy are first being
sent or given to stockholders is April 29, 1997.
SOLICITATION OF PROXIES
The persons named as proxies are Mr. C. Raymond Boelig, Chairman of the
Board, President and Chief Executive Officer of the Company, and Mr. James D.
Hart, Vice President, Finance and Administration, Treasurer and Chief Financial
Officer of the Company. Shares of stock represented at the Meeting by the
enclosed Proxy will be voted in the manner specified by the stockholder
executing the same. In the absence of specification, the shares of stock will be
voted FOR (i) the election of each of the four persons nominated by the Board to
serve as directors and (ii) the approval and ratification of the adoption of the
1997 Stock Plan (the "Plan") and in the discretion of the proxies, on other
business which may properly come before the Meeting. The cost of preparing,
assembling and mailing the Proxy, this Proxy Statement and the other material
enclosed will be borne by the Company. In addition to the solicitation of
proxies by use of the mails, officers and employees of the Company may solicit
proxies by telephone, telegram or other means of communication. The Company will
request brokerage houses, banking institutions, and other custodians, nominees
and fiduciaries, with respect to shares held of record in their names or in the
names of their nominees, to forward the proxy material to the beneficial owners
of such shares of stock and will reimburse them for their reasonable expenses in
forwarding the proxy material.
SHARES OUTSTANDING AND VOTING RIGHTS
Only holders of shares of Class A Common Stock, $0.01 par value ("Class A
Shares" or "Class A Common Stock"), of record as at the close of business on
April 10, 1997 (the "Record Date") are entitled to vote at the Meeting, or any
adjournment thereof. On the Record Date, there were issued and outstanding
5,507,321 Class A Shares. Each Class A Share is entitled to one vote on all
matters to be voted upon. The presence in person or by properly executed proxy
of the holders of a majority of the outstanding shares of Class A Common Stock
entitled to vote at the Meeting is necessary to constitute a quorum. Directors
are elected by a majority of the votes present in person or by proxy at the
Meeting and voting on such proposal. The affirmative vote of a majority of the
votes present in person or by proxy at the Meeting is required for the approval
of the Plan.
Stockholders of the Company vote at the Meeting by casting ballots (in
person or by proxy) which are tabulated by a person who is appointed by the
Board before the Meeting to serve as the inspector of election at the Meeting
and who has executed and verified an oath of office. For purposes of determining
the number of votes cast with respect to a particular matter, only those cast
"For" or "Against" are included. Abstentions and broker non-votes are counted
only for purposes of determining whether a quorum is present at the Meeting.
The stock transfer books of the Company will not be closed. Stockholders
who do not expect to attend the Meeting, but wish to have their shares of stock
voted at the Meeting, are urged to complete, sign, date and return the enclosed
Proxy as promptly as possible.
2
<PAGE> 4
ELECTION OF DIRECTORS
Four directors of the Company are to be elected to serve until the next
annual meeting of stockholders of the Company or until the election and
qualification of their respective successors. Each of the nominees named below
currently serves as a director of the Company. The persons named in the
accompanying Proxy intend to vote (unless authority to vote for directors is
withheld in such Proxy) all duly executed Proxies unrevoked at the time of the
exercise thereof for the election to the Board of all of the nominees named
below, each of whom consented to be named herein and to serve as a director if
elected at the Meeting. In the event that any nominee should become unavailable
prior to the Meeting, the Proxy will be voted for a substitute nominee
designated by the Board if a substitute nominee is designated. Listed below is
certain information with respect to each current nominee for election as a
director. For information concerning the number of shares of Class A Common
Stock beneficially owned by each nominee, see "Principal Stockholders."
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF THE NOMINEES
LISTED BELOW.
NOMINEES FOR DIRECTORS
The Company's directors and their ages as of April 15, 1997 are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------------------------- -------- -------------------------------------------------------------
<S> <C> <C>
C. Raymond Boelig(1).................... 43 Chairman of the Board, President, Chief Executive Officer and
Director
George B. Beitzel(2).................... 68 Director
Amos Kaminski(1)(2)..................... 67 Director
David G. Lubrano(1)(2).................. 66 Director
</TABLE>
- ------------------
(1) Member of Executive Committee.
(2) Member of the Compensation Committee and Audit Committee.
C. Raymond Boelig has been Chairman of the Board since December 6,
1996, a director of the Company since May 1, 1996 and President and Chief
Executive Officer of the Company since September 1993. Mr. Boelig has been
employed by the Company since December 1987 and has served most recently as
Chief Operating Officer from July 1993 through September 1993, Vice President of
OEM Sales and Marketing from February 1992 through July 1993 and Director of OEM
Sales and Marketing from January 1990 through February 1992.
George B. Beitzel has been a director of the Company since April 1989.
Mr. Beitzel retired in 1987 from International Business Machines Corporation
where he had been a Senior Vice President and a director. Mr. Beitzel currently
serves on the board of directors of: Bankers Trust New York Corporation, Caliber
System, Inc., Computer Task Group, Inc., Datalogix International, Inc.,
FlightSafety International, Inc., Phillips Petroleum Company, Rohm & Haas Co.,
TIG Holdings, Inc. and Xillix Technologies Corporation.
Amos Kaminski has been a director of the Company since 1985 and was
Chairman of the Board from 1991 through 1996. Mr. Kaminski founded Interfid
Ltd., a private investment advisory firm, in 1984 and has served as its
President and on its Board of Directors since its formation. Mr. Kaminski is
also the founder, President and Chairman of the Board of Directors of AFA Asset
Services, Inc., a private real estate asset management company.
David G. Lubrano has been a director of the Company since 1987. Mr.
Lubrano retired in 1985 from Apollo Computer Inc., a corporation engaged in
manufacturing workstations, which he co-founded and where he had been a Senior
Vice President of Finance and Administration, Chief Financial Officer and a
director.
The Company's By-laws provide that the Board will be elected at the
annual meeting of the stockholders, or at a special meeting of the stockholders
in lieu thereof, and that all directors shall hold office until the next annual
meeting of stockholders, or next special meeting of the stockholders in lieu
thereof, or until their successors are chosen and qualified.
3
<PAGE> 5
On March 27, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Archetype, Inc. ("Archetype"), pursuant to
which the Company will acquire Archetype, by merging Archetype (the "Merger")
into a wholly owned subsidiary of the Company. The Merger Agreement provides
that it is the intention of the Company that, as soon as practicable following
consummation of the Merger, the Company will seek to increase the number of
directors constituting the full Board to five and to cause the election or
appointment of Mr. Charles Ying as a director of the Company by the Board. Mr.
Ying is 51 years of age and is a private investor. From January 1992 through
January 1996, Mr. Ying was chief executive officer of Information International
Inc., a corporation engaged in manufacturing computer equipment. Mr. Ying
currently serves on the Board of Directors of Node Warriors Networks, Inc.
The Merger had not yet been consummated as of the printing of this
Proxy Statement and there can be no assurance that the Merger will be
consummated, therefore, Mr. Ying is not being presented as a nominee to the
Board at this time.
BOARD COMMITTEES
The Board has an Audit Committee, a Compensation Committee and, in
December 1996, established an Executive Committee. The Audit Committee reviews
the Company's accounting practices, internal accounting controls and financial
results and oversees the engagement of the Company's independent auditors. The
Compensation Committee establishes salaries, incentives and other forms of
compensation for directors, officers and other employees of the Company. The
Compensation Committee also administers the Company's benefit plans and will
administer the issuance of stock options and other awards under the Plan to all
Company employees and directors, including the members of such committee. The
Executive Committee oversees the management of the business and affairs of the
Company, including mergers and acquisitions, corporate governance and
nominations, and evaluation of strategic business opportunities. In the fiscal
year ended December 31, 1996, Messrs. Beitzel, Lubrano and Kaminski served as
members of both the Audit Committee and the Compensation Committee, and Messrs
Boelig, Kaminski and Lubrano served on the Executive Committee. Mr. Lubrano
serves as the Chairman of the Audit Committee, Mr. Beitzel serves as the
Chairman of the Compensation Committee and Mr. Kaminski serves as Chairman of
the Executive Committee.
During the fiscal year ending December 31, 1996, the full Board met 6
times and acted by unanimous written consent 5 times. The Audit Committee met 2
times, the Compensation Committee met 4 times, and the Executive Committee did
not meet during the fiscal year ending December 31, 1996. All incumbent
directors attended at least 75% of the aggregate number of the meetings of the
Board and the committees of which they were members.
DIRECTOR COMPENSATION
For the fiscal year ending December 31, 1996, each director who was not
an employee of the Company received $12,000 in cash compensation for service as
a director and Mr. Kaminski received additional cash compensation of $50,000 for
serving as Chairman of the Board.
On March 10, 1997, the Board, pursuant to the Plan, awarded warrants to
purchase 20,000 Class A Shares to each of Messrs. Beitzel, Kaminski and Lubrano
and incentive stock options ("ISOs") (subject to stockholder approval of the
Plan) and non-qualified options ("NQSOs") to purchase 40,485 Class A Shares and
4,515 Class A Shares, respectively, to Mr. Boelig. Each such warrants and
options have an exercise price equal to the fair market value of the Class A
Common Stock on the date granted and one-half of such warrants and options will
vest on the first anniversary of the date of the grant and the remainder will
vest on the second anniversary of the date of the grant.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Company at the
direction of the Board has prepared the following report for inclusion in this
Proxy Statement. The Committee is comprised of Messrs. Beitzel, Kaminski and
Lubrano, three non-employee directors who are "disinterested persons" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Committee has the responsibility for all compensation
matters concerning the Company's executive officers.
4
<PAGE> 6
COMPENSATION PHILOSOPHY
The Company's executive compensation program is intended to attract and
retain highly-qualified senior managers by providing compensation opportunities
that reflect the Company's business results and the individual executive's
performance. The Committee believes that these compensation opportunities will
motivate management's efforts by ensuring that the rewards received by Company
executives are consistent with the achievement of the Company's business
objectives and with the value added by management to the stockholders' interests
in the Company. The program provides for base salaries that reflect such factors
as level of responsibility, internal fairness and external competitiveness, and
annual incentive bonus awards that are payable in cash for the achievement of
target levels of sales and earnings, strategic acquisitions and other
initiatives, introduction of innovative products and services, and the
achievement of and progress toward other significant annual financial and
operational objectives as determined by the Committee. In general, the cash
compensation of the Company's executive officers approximates the average of
compensation paid to executives of appropriate comparator companies who occupy
positions of similar responsibilities. The program also provides long-term
incentive opportunities in the form of stock options that strengthen the
mutuality of economic interest between management and the Company's stockholders
and encourage management continuity.
The following is a discussion of each element of the Company's
executive compensation program, including a description of the decisions and
actions taken by the Committee with respect to the 1996 fiscal year compensation
for the Chief Executive Officer (the "CEO") and all executive officers as a
group.
MANAGEMENT COMPENSATION PROGRAM
Compensation of the Company's executive officers in the fiscal year
ended December 31, 1996 (as reflected in the tables that follow with respect to
the Named Executive Officers) consisted of the following elements: base salary,
annual incentive bonus and the opportunity for stock option grants under the
1996 Stock Plan. Total annual cash compensation for each executive officer
varies each year based on the Company's achievement of its annual objectives and
the individual's performance. No stock options were granted under the 1996 Stock
Plan during the 1996 fiscal year. However, stock options that were previously
granted to certain executive officers and employees under the 1994 Stock Plan
continue to be outstanding and unexercised. The potential value of previously
granted long-term stock options varies based upon the fair market value of the
Company's stock.
With respect to determining the base salary of executive officers, the
Committee takes into consideration a variety of factors, including the
executive's level of responsibility and individual performance, the salaries of
similar positions in comparable companies and the financial and operational
performance of the Company in relation to its objectives and its competitive
standing. The Company reviews the results of various industry salary surveys to
ensure its understanding of competitive compensation levels and practices in the
marketplace. From time to time, the Committee utilizes the services of a
recognized, independent external consulting firm to determine marketplace
compensation values and practices, and to assess the reasonableness of the
overall compensation program.
The Company's annual incentive bonus to its executive officers
(including the Named Executive Officers) is based on the achievement of
objective, financial and operational performance targets and the discretion of
the Committee. These targets may include sales volume, net operating income,
accomplishment of certain strategic business initiatives, and other performance
objectives as may be determined annually. In determining individual incentive
bonus awards, the accountability of executive officers and their individual
contributions towards the attainment of these objectives are considered. In
determining specific awards for the most recent performance year, the Committee
placed considerable emphasis on the Company's sales growth, progress toward
achievement of earnings objectives, strategic acquisition activity, new product
development and efforts in respect of the Company's initial public offering.
Through September 30, 1995, the Company's fiscal year end was September 30 of
each year. Effective as of December 31, 1995, the fiscal year of the Company was
changed to a calendar year basis (January 1 to December 31). With respect to
annual incentive bonus awards made to executive officers during 1996, the period
for which the performance of the Company and its executive officers was
evaluated was October 1, 1995 to September 30, 1996. In the future, the
calculation of the Company's financial and operational performance with respect
to the determination of these incentive bonus awards will be made as soon as is
practicable after the completion of the Company's fiscal year.
In addition to cash compensation, the Committee and the Board believe
that providing executive officers with stock ownership opportunities aligns the
interests of the executives with other stockholders and encourages the
executives' long-
5
<PAGE> 7
term retention in the Company. The long-term incentive element of the Company's
management compensation program is therefore in the form of stock option
grants. During the 1996 fiscal year, the Company adopted and stockholders
approved the 1996 Stock Plan which provides the facility for the granting of
both ISOs (under Section 422 of the Internal Revenue Code) and NQSOs. No stock
options were granted to the Named Executive Officers under the 1996 Stock Plan
during the 1996 fiscal year. Previously awarded stock options were granted and
are administered by the Committee under the Company's 1994 Stock Plan. Both the
1994 Stock Plan and the 1996 Stock Plan are intended to create opportunities for
executive officers and other key employees of the Company to acquire a
proprietary interest in the Company and thereby enhance their efforts in the
service of the Company and its stockholders. In addition, the vesting provisions
of such awards (which limit the exercisability of such options for certain
periods of time) encourage the continued service and stability of the management
team.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. C. Raymond Boelig, Chairman of the Board and Chief Executive
Officer of the Company is eligible to participate in the same executive
compensation programs in which other executive-level employees of the Company
participate. His total annual compensation for the 1996 fiscal year (including
compensation derived from salary and annual incentive bonus) was determined by
the Committee in consideration of the same performance criteria used to
establish pay levels for all other executive-level employees. In particular, Mr.
Boelig's salary for the year ended December 31, 1996 was at the rate of $180,000
per annum in recognition of the Board's overall satisfaction with his
performance and contributions. The Committee has determined that his salary is
somewhat below the median salary of Chief Executive Officers in a selected group
of comparator companies. His annual incentive bonus for the year ended December
31, 1996 was $50,000 which was based on the Committee's evaluation of his
performance, including his accountability for those Company factors stated
above, as well as his leadership and commitment to the growth of the Company.
Compensation Committee
George B. Beitzel
Amos Kaminski
David G. Lubrano
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning
compensation by the Company to its Chief Executive Officer (the "CEO") and each
of the Company's other executive officers who were serving as executive officers
on April 15, 1997 (together with the CEO, the "Named Executive Officers") whose
aggregate salary and bonus exceeded $100,000 for the fiscal year ended December
31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -----------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND POSITION YEAR (1) SALARY($) BONUS(2) OPTIONS/WARRANTS (#)(3) COMPENSATION ($)(4)
- ----------------- -------- --------- -------- ----------------------- -------------------
<S> <C> <C> <C> <C> <C>
C. Raymond Boelig ......................... 1996 196,923 50,000 -- 1,500
President and Chief Executive Officer 1995(5) 172,692 50,000 199,773(6) 1,500
James D. Hart ............................. 1996 81,500 35,000 -- 35,000(7)
Vice President, Finance and Administration 1995(8)
Treasurer and Chief Financial Officer
John S. Collins ........................... 1996 124,233 30,000 -- 1,492
Vice President, Engineering and 1995(9) 114,584 25,000 149,830(10) 2,451(11)
Development
Geoffrey W. Greve ......................... 1996 100,000 20,000 -- 1,200
Vice President, Type Operations 1995(12) 86,923 30,000 73,681 983
John S. Seguin ............................ 1996 124,231 66,410 -- 1,500
Vice President, Sales and Marketing 1995(13) 105,000 30,428 66,666(14) 1,072
</TABLE>
6
<PAGE> 8
- ------------------
(1) Effective December 31, 1995, the Company changed its fiscal year end of
September 30 to a calendar year end. The fiscal year ended December 31,
1996 commenced January 1, 1996. Because of the change in fiscal year, the
Company is presenting certain summary information concerning compensation
paid by the Company to the Named Executive Officers for the three months
ended December 31, 1995 in the footnotes below.
(2) For each of Messrs. Boelig, Collins and Greve, the bonus reflected in the
1995 fiscal year above were for services rendered in the twelve months
ended September 30, 1994 and the bonus reflected during the three months
ended December 31, 1995 in the footnotes below were for services rendered
during the twelve months ended September 30,1995.
(3) Represents options and warrants to purchase Class A Common Stock with an
exercise price of $0.90 per share, which was the fair market value of the
shares at the time of the grant as determined by the Board, granted on
November 30, 1994 pursuant to the Company's 1994 Stock Plan. All options
represented expire November 30, 2004 and are fully vested. All warrants
represented expire on November 30, 2001 and are fully vested. The Company
did not make any restricted stock awards, grant any stock appreciation
rights or make any long-term incentive plan payouts during the fiscal
years ended September 30, 1995 and December 31, 1996.
(4) Represents matching contributions by the Company for the account of the
Named Executive Officer under the Company's 401(k) Plan.
(5) Mr. Boelig's salary for the 1996 fiscal year included his base salary of
$180,000 plus an additional amount to compensate him for voluntarily
accepting a reduction is his base salary during the month of September
1995 and the three months ended December 31, 1995. In the three months
ended December 31, 1995, Mr. Boelig received $30,777 in salary and a bonus
of $50,000.
(6) Represents options to purchase 110,000 shares of Class A Common Stock and
a warrant to purchase 89,773 shares of Class A Common Stock.
(7) Represents a one-time payment of $35,000 made by the Company to Mr. Hart
to defer the cost of Mr. Hart's relocation from the New York City area to
the Boston, Massachusetts area in connection with his becoming a full-time
employee of the Company.
(8) Mr. Hart became a full-time employee of the Company in May 1996. See
"Certain Transactions--Interfid" and "Certain Transactions - Hart
Agreement."
(9) In the three months ended December 31, 1995, Mr. Collins received $25,000
in salary, a bonus of $25,000 and $1,450 of other compensation, $1,200 of
which was deferred compensation.
(10) Represents options to purchase 110,000 shares of Class A Common Stock and
a warrant to purchase 39,830 shares of Class A Common Stock.
(11) Includes $1,200 of deferred compensation.
(12) In the three months ended December 31, 1995, Mr. Greve received $23,077 in
salary, a bonus of $20,000 and $231 of other compensation.
(13) In the three months ended December 31, 1995, Mr. Seguin received $24,231
in salary, a bonus of $11,772 and $360 of other compensation.
(14) Represents options to purchase Class A Common Stock.
All of the Company's Named Executive Officers are employed on an at
will basis and, except for the compensation arrangements discussed below, none
of the Named Executive Officers is party to any employment agreements with the
Company. Pursuant to an agreement with the Company, for the fiscal year ending
December 31, 1997, Mr. Seguin will receive a bonus based on the amount of
Company revenues, operating results and expenses. Such bonus is set at $12,500
per quarter for revenues, operating results and expenses, meeting the Company's
business plan for the quarter and varies based on actual revenues, operating
results and expenses. In addition, Mr. Seguin will receive additional bonus
payments based on a percentage of annual Company revenues in excess of targeted
revenues for the year. Each of the executive officer may also receive
discretionary bonuses as may be determined by the Compensation Committee. See
"Certain Transactions-Hart Agreement."
OPTION AND WARRANT GRANTS
There were no options and warrants granted during the fiscal year ended
December 31, 1996 to the Company's Named Executive Officers.
The following table sets forth certain information concerning
exercisable and unexercisable options and warrants to purchase Class A Common
Stock held by each of the Named Executive Officers as of December 31, 1996. None
of the Named Executive Officers exercised any options or warrants during the
year ended December 31, 1996.
7
<PAGE> 9
AGGREGATED OPTION/WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/WARRANT VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS OPTIONS/WARRANTS
AT DECEMBER 31, 1996 AT DECEMBER 31, 1996
--------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
C. Raymond Boelig..................... 110,000 -- $ 616,000 --
89,773 -- 502,729 --
John S. Collins....................... 110,000 -- 616,000 --
39,830 -- 223,048 --
Geoffrey Greve........................ 73,681 -- 412,614 --
James D. Hart......................... 100,996 -- 565,578 --
John S. Seguin........................ 66,666 -- 373,330 --
</TABLE>
- ------------------
(1) Options are "in-the-money" at the fiscal year end if the fair market value
of the underlying securities on such date exceed the exercise or base
price of the option. The last sales price on the securities underlying the
options on December 31, 1996, as quoted in the Nasdaq National Market, was
$6.50 per share, and the exercise price of the applicable options is $0.90
per share.
On January 27, 1997, the Board awarded ISOs to purchase Class A Shares
pursuant to the 1996 Stock Plan to Mr. Greve and Mr. Seguin. Mr. Greve was
awarded 26,380 ISOs exercisable at a price of $4.63 per share and Mr. Seguin was
awarded 33,334 ISOs exercisable at a price of $4.63 per share. The exercise
price of such ISOs equals the closing price of the Class A Shares on the date of
the grant.
On March 10, 1997, the Board granted options to purchase Class A Common
Stock under the Plan (subject to, in the case of ISOs, stockholder approval of
the Plan) to each of Messrs. Boelig (40,485 ISOs and 4,515 NQSOs), Collins
(30,000 ISOs), Greve (15,000 ISOs), Hart (15,000 ISOs) and Seguin (30,000 ISOs),
each of whom is a Named Executive Officer. Such options have an exercise price
equal to the fair market value of the Class A Common Stock on the date they were
granted, are exercisable for seven years, and vest one-half of the first
anniversary of the date of grant and one half on the second anniversary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1996, Messrs. Beitzel,
Kaminski and Lubrano fulfilled all functions of the Compensation Committee with
regard to determining compensation of executive officers of the Company. For a
description of the relationship between Mr. Amos Kaminski, a member of the
Board, Mr. James D. Hart, Vice-President, Finance and Administration, Treasurer
and Chief Financial Officer, Interfid and certain significant principal
stockholders of the Company, see "Certain Transactions--Interfid." Messrs.
Beitzel, Kaminski and Lubrano, and a trust in which Mr. Beitzel and his family
members are the beneficiaries and in which Mr. Beitzel's wife and children share
voting power (the "Beitzel Family Trust"), were among certain directors and
principal stockholders who made loans to the Company. See "Certain
Transactions--Bridge Loans."
STOCK PERFORMANCE GRAPH
The line graph below compares the percentage change in cumulative total
stockholder return on the Class A Common Stock assuming an investment of $100 on
October 30, 1996, the date on which the Class A Common Stock was first publicly
traded, with the total cumulative return of the Total Return Index for the
Nasdaq Stock Market (US) and the Nasdaq Computer & Data Processing Services
Stock index for the period from October 31, 1996 to December 31, 1996. The Class
A Common Stock was sold in its initial public offering at a price of $6.00, and
the closing sales price of the Class A Common Stock on the Nasdaq National
Market on December 31, 1996 was $6.50.
8
<PAGE> 10
<TABLE>
<CAPTION>
=====================================================================================================================
October 31, 1996 November 29, 1996 December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bitstream Inc. 109 84 118
- ---------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market (US) 101 108 107
- ---------------------------------------------------------------------------------------------------------------------
Nasdaq Computer & Data 102 109 108
Processing Services
=====================================================================================================================
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BRIDGE LOANS
On February 22, 1996, the Company entered into a Loan Agreement (the
"Bridge Loan Agreement") with certain parties (each a "Bridge Lender"), pursuant
to which the Company borrowed an aggregate amount of $600,000 (the "Bridge
Loan") from the Bridge Lenders. The Bridge Lenders were Messrs. Kaminski
($24,000 Bridge Loan), Lubrano ($18,000 Bridge Loan), Morton E. Goulder ($16,000
Bridge Loan), Beitzel ($11,500 Bridge Loan), The Beitzel Family Trust ($11,500
Bridge Loan), Gotthard Bank (Nassau Branch), acting for the account of certain
of its clients and their respective registered assigns ($281,000 Bridge Loan),
JHI Development Capital Limited ($155,000 Bridge Loan), and BancBoston Ventures,
Inc. ($83,000 Bridge Loan).
In connection with the Bridge Loan Agreement, the Company executed a
promissory note in favor of each Bridge Lender, pursuant to which the Company
agreed to pay the principal amount borrowed from such Bridge Lender, plus simple
interest at twelve percent (12%) per annum thereon, on August 22, 1996. The
Company agreed to an interest rate of 12% on the Bridge Loans given the fact
that the Bridge Loans are unsecured and subordinate to the Company's senior
9
<PAGE> 11
indebtedness. At the time the Bridge Loan Agreement was entered into, the
interest rate on the Company's senior secured indebtedness was 10.5% per annum.
On August 22, 1996, the Company entered into an amendment extending the maturity
date of the Bridge Loans to October 22, 1996, and on October 9, 1996, the
Company entered into a further amendment extending the maturity date of the
Bridge Loans to December 22, 1996. The Company used the proceeds of the Bridge
Loans for working capital.
The Company used a portion of the proceeds from its initial public
offering (the "IPO") of Class A Common Stock, which was completed in November
1996, to repay all amounts due to the Bridge Lenders under the Bridge Loan
Agreement. As of December 31, 1996, the Company satisfied all of its repayment
obligations under the Bridge Loan Agreement.
INTERFID
As of May 1, 1996, Mr. James D. Hart became a full-time employee of the
Company. See "Management--Executive Compensation." From July 1, 1993 until April
30, 1996, the services of Mr. Hart, who, prior to May 1, 1996, was a
Vice-President of Interfid, were made available to the Company by Interfid on an
as-needed basis to render financial advisory services to the Company, and, from
March 1994 to May 1, 1996, to serve as Treasurer, Secretary and acting Chief
Financial Officer of the Company. As compensation for the services rendered by
Mr. Hart to the Company, the Company paid to Interfid $10,000 per month, with
respect to the period from January 1, 1996 until April 30, 1996, and $5,000 per
month with respect to the period from July 1, 1993 to December 31, 1995, and
reimbursed Interfid for reasonable out-of-pocket expenses incurred by Interfid
or Mr. Hart in connection with the performance of Mr. Hart's services to the
Company. There was no written agreement between the Company and Interfid in
respect of Mr. Hart's services. During the period prior to May 1, 1996, the
Company was not obligated to pay any compensation directly to Mr. Hart; his
compensation was paid by Interfid. However, the Board awarded Mr. Hart a
discretionary cash award of $20,000 for each of the fiscal years ended September
30, 1994 and September 30, 1995, respectively, and on November 30, 1994, granted
him a warrant to purchase 99,886 shares of Class A Common Stock under the 1994
Stock Plan. Amos Kaminski, a member of the Board, is a director and the
controlling stockholder of Interfid. Interfid renders investment advisory
services to Premier Resources, Ltd., ("Premier"), a Bahamanian corporation.
Premier serves as an investment advisor to each of Privest I N.V. and Privest II
N.V. and may be deemed the beneficial owner of the Company's stock owned of
record by such entities. See "Principal Stockholders" and note 4 to the table
contained therein. Interfid has rendered investment advice to Premier in
connection with the investments by Privest I N.V. and Privest II N.V.
in the Company.
HART AGREEMENT
Effective May 1, 1996, James D. Hart entered into an agreement with the
Company pursuant to which he became a full-time employee of the Company, on an
at will basis, and Vice President, Finance and Administration, Treasurer and
Chief Financial Officer. Pursuant to such agreement, Mr. Hart, among other
things, received a $65,000 loan from the Company. Such loan bears interest at
the rate of 6.66% per annum, is payable quarterly, and provides for payment of
interest only until June 30, 1999. The principal balance of such loan is payable
in equal quarterly installments from July 1, 1999 until June 30, 2006, at which
time, such loan is due and payable in full. The principal balance of such loan
will be forgiven by the Company if Mr. Hart's employment is terminated by the
Company without cause or due to his death or disability. Such loan shall become
immediately due and payable if Mr. Hart voluntarily terminates his employment or
his employment is terminated by the Company for cause.
10
<PAGE> 12
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Class A Common Stock as of April 15, 1997 by (i)
each person or entity known to own beneficially more than 5% of the outstanding
shares of Class A Common Stock, (ii) each of the Company's directors, (iii) each
of the executive officers of the Company, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-------------------------------
NAME AND ADDRESS(2) NUMBER PERCENT
- ---------------------------------------------------- ---------------- -------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
JHI Development Capital Limited(3) 736,616 13.34%
St. James House,
New St. James Place
St. Helier, Jersey JE4 8WH
Channel Islands
Privest I N.V.(4) 668,417 12.11
c/o Caribbean Management Company
14, John B. Gorsiraweg
Curacao, Netherland Antilles
Privest II N.V.(4) 665,244 12.05
c/o Caribbean Management Company
14, John B. Gorsiraweg
Curacao, Netherland Antilles
Wells Fargo Bank, N.A.(5) 546,000 9.91
464 California Street
San Francisco, California 04163
BancBoston Ventures, Inc.(6) 390,384 7.08
100 Federal Street
Boston, MA 02110
DIRECTORS AND EXECUTIVE OFFICERS
C. Raymond Boelig(7) 199,773 3.50
John S. Collins(8) 160,829 2.84
Amos Kaminski(9) 159,549 2.88
c/o Interfid Ltd.
150 E. 58th Street, 27th Floor
New York, NY 10155-2798
George Beitzel(10) 135,596 2.45
29 King Street
Chappaqua, NY 10514
James D. Hart(11) 100,996 1.8
David G. Lubrano(12) 110,708 2.0
94 Otis Street
Hingham, MA 02043
Geoffrey W. Greve(13) 73,620 1.32
John S. Seguin(14) 66,666 1.20
All directors and executive officers as a group (8 persons) 967,785 15.63
(7)(8)(9)(10)(11)(12)(13)(14)
</TABLE>
11
<PAGE> 13
- ------------------
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Class A Common Stock shown as beneficially owned by them, subject to
community property laws where applicable. The information presented with
respect to the Principal Stockholders is based on reports of beneficial
ownership on Schedules 13D and 13G delivered to the Company pursuant to
the Exchange Act and such other information as may have been provided to
the Company by any such Principal Stockholder. In accordance with the
rules of the Securities and Exchange Commission, Class A Common Stock,
subject to stock options or warrants which are currently exercisable or
which become exercisable within 60 days after April 15, 1997, are deemed
outstanding for computing the share ownership and percentage ownership of
the person holding such options or warrants, but are not deemed
outstanding for computing the percentage ownership of any other person.
The inclusion herein of shares listed as beneficially owned does not
constitute an admission of beneficial ownership.
(2) Unless otherwise indicated, the address of the officer listed is: c/o
Bitstream Inc., 215 First Street, Cambridge, MA 02142.
(3) Includes 14,234 shares issuable to JHI Development Capital Limited upon
the exercise of warrants. JHI Development Capital Limited is a wholly
owned subsidiary of James Hardie (Holdings) Limited, a Jersey registered
company, which has a principal place of business at St. James House, New
St. James Place, St. Helier, Jersey JE4 8WH, Channel Islands. James
Hardie (Holdings) Limited is indirectly owned by James Hardie Industries
Limited, an Australian publicly held company, which has a principal
place of business at 65 York Street, Sydney NSW 2000, Australia. James
Hardie Industries Limited may be deemed the beneficial owner of the
shares of the Company held by JHI Development Capital Limited.
(4) Includes 14,443 shares and 14,443 shares issuable to Privest I N.V. and
Privest II N.V., respectively, upon the exercise of warrants. Premier may
be regarded as the beneficial owner of these shares because it serves as
an investment advisor to each of Privest I N.V. and Privest II N.V. and
has at times in the past been delegated, and may from time to time in the
future be delegated, the authority to vote or direct the vote or to
dispose or direct the disposition of these shares. Premier, a corporation
established under the laws of the Commonwealth of the Bahamas, has a
principal place of business at IBM House-East Bay Street, Nassau, Bahamas
and is a wholly owned subsidiary of Gesfid International Ltd., a
corporation established under the laws of the Commonwealth of the Bahamas,
which is a wholly owned subsidiary of Gesfid, S.A., a fiduciary
corporation established under the laws of Switzerland, which has a
principal place of business at Via Adamini, 10a, Lugano, Switzerland.
Gesfid, S.A. is indirectly controlled by Mr. Antonio Saladino, a citizen
of Switzerland, who has a principal place of business at Via Adamini, 10a,
Lugano, Switzerland. Mr. Saladino may be deemed to be the beneficial owner
of the shares of the Company held by Privest I N.V. and Privest II N.V. to
the extent that Premier is delegated the authority to vote or direct the
vote or to dispose of such shares.
(5) Wells Fargo Bank, N.A. holds sole voting power with respect to 526,000
shares. Wells Fargo Bank, N.A. is a national banking association.
(6) Includes 7,776 shares issuable to BancBoston Ventures, Inc. upon the
exercise of warrants. BancBoston Ventures, Inc. is an indirect subsidiary
of Bank of Boston Corporation, a Massachusetts holding company, which may
be deemed beneficial owner of any shares of the Company held by BancBoston
Ventures, Inc.
(7) Includes 89,773 shares and 110,000 shares issuable to Mr. Boelig upon the
exercise of warrants and options, respectively.
(8) Includes 39,941 shares and 110,000 shares issuable to Mr. Collins upon the
exercise of warrants and options, respectively, and 10,888 shares held by
Mr. and Mrs. Collins as joint tenants.
(9) Includes 27,820 shares issuable to Mr. Kaminski upon the exercise of
warrants. Also includes 20,000 shares and 1,110 shares issuable upon the
exercise of warrants held of record by Interfid of which Mr. Kaminski is
President and a director and, therefore, Mr. Kaminski may be deemed to be
a beneficial owner of such shares.
(10) Includes 27,442 shares issuable to Mr. Beitzel upon the exercise of
warrants. Also includes 30,002 shares and 524 shares issuable upon the
exercise of warrants, all held of record by the Beitzel Family Trust.
Since Mr. Beitzel and his family are the beneficiaries of the Beitzel
Family Trust and Mr. Beitzel's wife and children share voting power
therein, Mr. Beitzel may be deemed beneficial owner of such shares.
(11) Includes 100,996 shares issuable to Mr. Hart upon the exercise of
warrants.
(12) Includes 27,353 shares issuable to Mr. Lubrano upon the exercise of
warrants.
(13) Includes 73,616 shares issuable to Mr. Greve upon the exercise of options.
(14) Includes 66,666 shares issuable to Mr. Seguin upon the exercise of
options.
PROPOSAL NO. II - THE 1997 STOCK PLAN
At a meeting held on March 10, 1997, the Board, subject to stockholder
approval, adopted the Plan under which the Company is authorized to grant
incentive stock options, nonqualified stock options and warrants to purchase up
to 1,000,000 shares of Class A Common Stock (however, in the event the Merger is
not consummated on or prior to September 30, 1997, the aggregate number of
shares which may be issued under the Plan shall be reduced to 500,000).
Although, as of April 15, 1997, only 563,786 options to purchase Class
A Shares have been awarded out of the 667,000 available under the 1996 Stock
Plan, substantially all of the remaining options to purchase Class A Shares
under the 1996 Stock Plan have been reserved for issuance in connection with the
options to purchase Class A Shares which the Company would be required to issue
to certain employees of the Archetype pursuant to the Merger Agreement upon the
consummation of the Merger. Accordingly, the Board determined that it was in the
best interests of the Company and its stockholders to adopt the Plan to provide
for the availability of additional stock option grants. In addition to the
options reserved under the
12
<PAGE> 14
1996 Stock Plan, it is expected that the Company will issue options to purchase
an additional 200,000 Class A Shares under the Plan to certain senior executives
of Archetype in connection with their entering the employ of the Company. See
"Grants."
The following summary of the Plan, is qualified in its entirety by the
specific language of the Plan, a copy of which is attached to this Proxy
Statement for stockholder review as Exhibit A.
GENERAL
The Plan provides for the grant of incentive stock options ("ISOs")
(within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code")), non-qualified stock options ("NQSOs") and warrants to
certain directors, officers and employees of the Company. The Plan further
provides for the grant of NQSOs and warrants to directors and agents of, and
consultants to, the Company, whether or not employees of the Company. The
purpose of the Plan is to attract and retain employees, agents, consultants and
directors. Options and warrants granted under the Plan may not be exercisable
for terms in excess of 10 years from the date of grant. In addition, no options
or warrants may be granted under the Plan later than 10 years after the Plan's
effective date. The exercise price of any NQSO or warrant is fixed by the Board
on the date it is granted and the exercise price of an ISO shall be not less
than the fair market value of the Class A Common Stock it is on the date it is
granted. The shares subject to and available under the Plan may consist, in
whole or in part, of authorized but unissued stock or treasury stock not
reserved for any other purpose. Any shares subject to an option or warrant that
terminates, expires or lapses for any reason, and any shares purchased pursuant
to an option or warrant and subsequently repurchased by the Company pursuant to
the terms of the option, shall again be available for grant under the Plan.
If an option holder's employment with the Company ceases, for any
reason other than death or disability, all options held by him on the date his
employment ceases will terminate on the earlier of the option's expiration or,
in the case of an ISO, 90 days after the date his employment ceases, and in the
case of an NQSO, as determined by the Board.
If an option holder dies or is disabled, his option may be exercised,
to the extent of the number of shares with respect to which he could have
exercised it on the date of his death, by his estate, personal representative or
beneficiary who acquires the option by will or by the laws of descent and
distribution, at any time prior to the earlier of the option's expiration and,
in the case of an ISO, 90 days after the occurrence of his death or 180 days
after the date of his disability, or in the case of a NQSO, as determined by the
Board. On the earlier of such dates, the option terminates.
No option is assignable or transferable by the option holder except by
will or by laws descent and distribution, and during the lifetime of the option
holder the option may be exercisable only by him.
The number and price of shares of Class A Common Stock covered by each
option, the total number of shares that may be sold under the Plan, and the
maximum number of shares that may be sold, issued or transferred to an employee,
will be proportionately adjusted to reflect, any stock dividend or stock split
of the Class A Common Stock or any recapitalization of the Company. Unless
otherwise determined by the Board, upon consummation of a consolidation or
merger of the Company into another entity, or a sale of all or substantially all
of the assets of the Company, all outstanding options and warrants will become
fully vested and immediately exercisable. In the event of a distribution or
liquidation of the Company, each outstanding option or warrant shall terminate.
The Board may at any time terminate the Plan or make such modification
or amendment thereof as it deems advisable; provided, however, (i) the Board may
not, without the approval of the stockholders, increase the maximum number of
shares for which options or warrants may be granted or change the designation of
the class of persons eligible to receive options or warrants under the Plan, and
(ii) any such modification or amendment of the Plan shall be approved by a
majority of the stockholders of the Company to the extent that such stockholder
approval is necessary to comply with applicable provisions of the Code, rules
promulgated pursuant to Section 16 of the Exchange Act, applicable state law, or
applicable National Association of Securities Dealers or exchange listing
requirements. Termination or any modification or amendment of the Plan shall
not, without an option holders consent, affect his or her rights under any
option or warrant theretofore granted to such option holder.
The specific future benefits or amounts to be received by directors,
officers and employees under the Plan is not determinable.
13
<PAGE> 15
ADMINISTRATION
The Plan is administered by the Board which will determine, in its
discretion, among other things, the recipients of grants, whether a grant will
consist of ISOs, NQSOs or warrants or a combination thereof, and the number of
shares of Class A Common Stock to be subject to such options or warrants. In
accordance with the discretion granted to the Board under the terms of the Plan,
the Board may delegate its power, duties and responsibilities under the Plan to
the Compensation Committee. See "Board Committees."
LIMITATIONS
The Plan contains certain limitations applicable only to ISOs granted
thereunder. To the extent that the aggregate fair market value, as of the date
of grant, of the shares to which ISOs become exercisable for the first time by
an option holder during the calendar year exceeds $100,000, the ISO will be
treated as a NQSO. In addition, if an option holder owns more than 10% of the
total combined voting power of all classes of the Company's stock or any
subsidiary of the Company at the time the individual is granted an ISO, the
exercise price per share cannot be less than 110% of the fair market value per
share of Class A Common Stock.
GRANTS
On March 10, 1997, the Board granted options and warrants to purchase
Class A Common Stock under the Plan (subject to, in the case of ISOs,
stockholder approval of the Plan) to each of Messrs. Boelig (40,485 ISOs and
4,515 NQSOs), Collins (30,000 ISOs), Greve (15,000 ISOs), Hart (15,000 ISOs) and
Seguin (30,000 ISOs), each of whom is a Named Executive Officer, and warrants to
purchase 20,000 shares of Class A Common Stock to each of Messrs. Beitzel,
Kaminski and Lubrano, each of whom is a director of the Company, under the Plan.
Such options and warrants have an exercise price equal to the fair market value
of the Class A Common Stock on the date they were granted, are exercisable for
seven years, and vest one-half of the first anniversary of the date of grant and
one half on the second anniversary.
In connection with the Merger, the Company expects to grant options
under the Plan to purchase up to 200,000 shares of Class A Common Stock to
certain employees of Archetype to induce them to enter into the employment of
the Company. Such options, if granted, will have an excise price equal to the
fair market value of the Class A Common Stock on the date granted and shall be
exercisable for seven years thereafter. Fifty percent of such options will vest
six months after the date they are granted, 25% will vest on the first
anniversary and the remainder will vest on the second anniversary of the date of
grant.
After giving effect to the options proposed to be granted in connection
with the Merger, and the options and warrants granted to officers and directors,
there will be approximately 605,000 shares of Class A Common Stock available for
issuance upon the exercise of options and warrants available to be granted
pursuant to the Plan.
On April 15, 1997, the closing price for the Class A Common Stock on
the Nasdaq National Market was $3.625.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Plan may be either ISOs or NQSOs options.
ISOs are those that are intended to be treated as "incentive stock options"
within the meaning of Section 422 of the Code. Under the Code as currently in
effect, and under Treasury Regulations specifying that an option does not have a
readily ascertainable fair market value unless it meets certain conditions not
met here, the grant of either an ISO or a NQSO under the Plan is not taxed at
the time of grant.
When a NQSO or warrant is exercised, the excess of the fair market
value of the shares received over the exercise price is taxable as ordinary
income to the option holder. Special rules may apply to exercises by officers
and directors.
The holder of an ISO generally will not be taxed when the option is
exercised and, provided the Class A Common Stock received upon exercise is not
disposed of within one year of receipt of the shares upon exercise or two years
of the date on which the option or warrant is granted, the gain on the
subsequent disposition will receive long-term capital gains treatment.
For a NQSO, or warrant, the Company generally will be entitled to a
deduction at the same time and in the same amount that the option holder or
warrant recognizes ordinary income, to the extent that such income is considered
reasonable compensation under the Code. For an ISO, the Company will not be
entitled to a deduction upon the exercise of the option.
14
<PAGE> 16
However, if an ISO holder disposes of the stock within the holding periods
described above, he may recognize ordinary income and the Company generally
would be entitled to a deduction in an equivalent amount.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. II.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On February 13, 1996, Messrs. Beitzel, Kaminski and Lubrano, each a
director to the Company, filed an amendment to the Form 3 filed by each of them
on October 30, 1996, the effective date of the IPO, on which each director
reported that he holds unvested warrants to purchase 13,334 shares of Class A
Common Stock at an exercise price of $0.90 a share which were not previously
reported.
On December 14, 1996, each of James Hardie Industries Limited ("JH
Industries"), an Australian publicly-held corporation, and James Hardie
(Holdings) Limited, a Jersey registered company which is an indirect subsidiary
of JHI Industries ("JH Holdings"), filed a Form 3 reporting the shares of Class
A Common Stock held by JHI Development Capital Limited ("JHI"), which is the
beneficial owner of more than 10% of Class A Common Stock. JHI, which timely
filed a Form 3 representing the shares of Class A Common Stock held by it, is a
wholly owned subsidiary of JH Holdings. JH Industries and JH Holdings may,
therefore, be deemed the beneficial owner of the shares of the Company held by
JHI.
The Company is not aware of any other late filings pursuant to Section
16(a) of the Exchange Act.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented at the next
Annual Meeting of Stockholders of the Company to be held during 1998 must be
received by the Company before January 7, 1998 for inclusion in the Company's
proxy and proxy statement relating to said meeting. The Company has received no
proposals from stockholders for consideration at the Annual Meeting of
Stockholders to be held on May 28, 1997.
OTHER MATTERS
The management of the Company knows of no business other than that
referred to in the foregoing Notice of Annual Meeting of Stockholders and Proxy
Statement which may come before the Meeting. Should any other matters come
before the Meeting, it is the intention of the persons named in the accompanying
Proxy to vote such Proxy in accordance with their judgment on such matters.
The Company's Annual Report, which includes the Company's audited
financial statements for the fiscal year ended December 31, 1996, is being
mailed concurrently herewith to all of the Company's stockholders of record.
By Order of the Board of Directors
Paul A. Gajer
Assistant Secretary
15
<PAGE> 17
EXHIBIT A
BITSTREAM INC. - 1997 STOCK PLAN
<PAGE> 18
TABLE OF CONTENTS
PAGE
1. PURPOSE....................................................................1
2. ADMINISTRATION OF THE PLAN.................................................1
A. BOARD OR COMPENSATION COMMITTEE ADMINISTRATION....................1
B. COMMITTEE ACTION..................................................3
C. GRANT OF STOCK RIGHTS TO MEMBERS OF THE BOARD.....................3
D. COMPLIANCE WITH FEDERAL SECURITIES LAWS...........................3
3. ELIGIBLE EMPLOYEES AND OTHERS..............................................4
4. STOCK SUBJECT TO OPTIONS, AWARDS AND PURCHASES.............................4
5. GRANTING OF STOCK RIGHTS...................................................4
6. MINIMUM OPTION PRICE; ISO LIMITATIONS......................................5
A. PRICE FOR WARRANTS OR NON-QUALIFIED OPTIONS.......................5
B. PRICE FOR ISOS....................................................5
C. $100,000 ANNUAL LIMITATION FOR ISOS...............................5
D. DETERMINATION OF FAIR MARKET VALUE.........................................5
7. OPTION DURATION............................................................6
8. EXERCISE OF OPTION.........................................................6
A. FULL VESTING OR PARTIAL VESTING...................................6
B. FULL VESTING OF INSTALLMENTS......................................6
C. PARTIAL EXERCISE..................................................6
D. ACCELERATION OF VESTING...........................................6
E. EMPLOYEES OWNING GREATER THAN TEN PERCENT OF VOTING STOCK.........6
9. EMPLOYMENT.................................................................7
A. TERMINATION OF EMPLOYMENT.........................................7
B. LEAVES OF ABSENCE.................................................7
C. CHANGES OF EMPLOYMENT.............................................7
10. DEATH; DISABILITY..........................................................7
A. DEATH.............................................................7
B. DISABILITY........................................................8
-i-
<PAGE> 19
Page
11. ASSIGNABILITY.............................................................8
12. TERMS AND CONDITIONS OF OPTIONS...........................................8
13. ADJUSTMENTS...............................................................8
A. STOCK DIVIDENDS AND STOCK SPLITS.................................8
B. CONSOLIDATIONS OR MERGERS........................................9
C. RECAPITALIZATION OR REORGANIZATION...............................9
D. MODIFICATION OF ISOS............................................10
E. DISSOLUTION OR LIQUIDATION......................................10
F. ISSUANCES OF SECURITIES.........................................10
G. FRACTIONAL SHARES...............................................10
H. ADJUSTMENTS.....................................................10
14. MEANS OF EXERCISING STOCK RIGHTS........................................ 10
15. TERM AND AMENDMENT OF PLAN.............................................. 11
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; CANCELLATION OF ISOS......12
17. APPLICATION OF FUNDS.....................................................12
18. GOVERNMENT REGULATION....................................................12
19. WITHHOLDING OF ADDITIONAL INCOME TAXES...................................12
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION...........................13
21. RESTRICTIONS ON EXERCISE OF OPTIONS AND ISSUANCE OF SHARES...............13
22. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.....14
23. DUTIES OF THE COMPANY............................................ .......14
24. NOTICES. ................................................................14
25. GOVERNING LAW -- CONSTRUCTION............................................15
-ii-
<PAGE> 20
1997 STOCK PLAN
1. PURPOSE. This 1997 Stock Plan (the "Plan") is intended to provide
incentives to:
A. Directors, officers, employees and consultants of Bitstream Inc.
(the "Company"), its parent (if any) and any present or future subsidiaries
(collectively, "Related Corporations") by providing them with awards of
stock in the Company ("Awards"); and
B. Officers and other employees of the Company and Related
Corporations by providing them with options granted hereunder that qualify
as "incentive stock options" under Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code") ("ISO" or "ISOs") substantially in
the form attached hereto as Exhibit 8A;
C. Directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to purchase stock
in the Company pursuant to warrants granted hereunder which do not qualify
as ISOs ("Warrant" or "Warrants"), substantially in the form attached
hereto as Exhibit 8B;
D. Directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to purchase stock
in the Company pursuant to Non-Qualified Options granted hereunder which do
not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"),
substantially in the form attached hereto as Exhibit 8C;
E. Directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases").
ISOs, Warrants and Non-Qualified Options are referred to hereafter individually
as an "Option" and collectively as "Options". Options, Awards and authorizations
to make Purchases are referred to hereafter collectively as "Stock Rights". As
used herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation", respectively, as those terms are defined in Section
424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMPENSATION COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board"). The
Board may appoint a Compensation Committee of two or more of its members to
administer this Plan,
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Bitstream Inc.
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as assisted by the officers of the Company. Subject to ratification of the
grant or authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to
(i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible under
paragraph 3 to receive ISOs) to whom ISOs may be granted, and to
determine (from among the class of individuals and entities eligible
under paragraph 3 to receive Warrants, Non-Qualified Options and
Awards and to make Purchases) to whom Warrants, Non-Qualified Options,
Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards may
be granted or Purchases made;
(iii) determine the option price of shares subject to each
Option, which price shall not be less than the minimum price specified
in paragraph 6, and the purchase price of shares subject to each
Purchase;
(iv) determine whether each Option granted shall be an ISO, a
Warrant or Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when
each Option shall become exercisable and the duration of the exercise
period;
(vi) determine whether restrictions such as repurchase options
are to be imposed on shares subject to Options, Awards and Purchases
and the nature of such restrictions, if any, and
(vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it.
If the Committee determines to issue a Warrant or Non-Qualified Option, it shall
take whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Stock Right granted under it shall be final unless
otherwise determined by the Board. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best. No
member of the Board or the Committee shall be held liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
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Bitstream Inc.
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B. COMMITTEE ACTION. The Committee may select one of its
members as its chairman and shall hold meetings at such time and places
as it may determine. Acts by a majority of the Committee, or acts
reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee. All references in
this Plan to the Committee shall mean the Board if no Committee has
been appointed. From time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the
Com mittee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO MEMBERS OF THE BOARD.
Notwithstanding the provisions of paragraph 2(A), no Stock Right shall
be granted to any person who serves as a member of the Board at the
time of the proposed grant, unless such grant has been approved by a
majority vote of the disinterested members of the Board and otherwise
approved in accordance with the following paragraph 2(D), if
applicable. [For the purposes of the Plan, a member of the Board shall
be deemed to be "disinterested" only if such person qualifies as a
"disinterested person" within the meaning of paragraph (c)(2) of Rule
16(b)-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as such term the Board is interpreted
from time to time.]
All grants of Stock Rights to members of the Board shall in
all other respects be made in accordance with those provisions of this
Plan that apply to other eligible persons. Members of the Board who are
either (i) eligible for Stock Rights pursuant to the Plan or (ii) have
been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to
the Plan, except that no such member shall act upon the granting to
himself of Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting to him of
Stock Rights. The signatures of all the Board members on a unanimous
consent of directors in lieu of a meeting may constitute the majority
vote required by the foregoing paragraph.
D. COMPLIANCE WITH FEDERAL SECURITIES LAWS. The following
shall apply to any grant of Stock Rights to a member of the Board in
the event the Company registers any class of any equity security
pursuant to the Exchange Act, if such grant occurs at any time from the
effective date of such registration until six months after the
termination of such registration: A majority vote of the other members
of the Board must approve such grant. If a majority of the Board is
eligible to participate in the Plan or in any other stock option or
other stock plan of the Company or any of its affiliates, or has been
so eligible at any time within the preceding year, any grant of Stock
Rights to a member of the Board must be made by, or only in accordance
with the recommendation of, the Compensation
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Bitstream Inc.
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Committee or a committee consisting of three or more persons, who may
but need not be directors or employees of the Company, appointed by the
Board but having full authority to act in the matter, none of whom is
eligible to participate in this Plan or any other stock option or other
stock plan of the Company or any of its affiliates, or has been
eligible at any time within the preceding year. The requirements
imposed by the preceding sentence shall also apply with respect to
grants to officers who are not also directors. Once appointed, such
committee shall continue to serve until otherwise directed by the
Board.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers and directors of the
Company or any Related Corporation who are not employees may not be granted ISOs
under the Plan. Warrants, Non-Qualified Options, Awards and authorizations to
make Purchases may be granted to any director (whether or not an employee),
officer, employee or consultant of the Company or any Related Corporation. The
Compensation Committee may take into consideration a recipient's individual
circumstances in determining whether to grant an ISO, a Warrant, Non-Qualified
Option or an authorization to make a Purchase. Granting of any Stock Right to
any individual or entity shall neither entitle that individual or entity to, nor
disqualify him from, participation in any other grant of Stock Rights.
4. STOCK SUBJECT TO OPTIONS, AWARDS AND PURCHASES. The stock subject to
Options, Awards and Purchases shall be authorized but unissued shares of Class A
Common Stock of the Company, par value $.01 per share (the "Common Stock"), or
shares of Common Stock reacquired by the Company in any manner. The aggregate
number of shares which may be issued pursuant to the Plan equals 1,000,000
provided, that, in the event the acquisition by the Company of Archetype, Inc.
("Archetype"), whether by purchase of stock and/or assets and/or the merger of
Archetype with or into the Company or any subsidiary thereof, is not consummated
on or prior to September 30, 1997, the aggregate number of shares which may be
issued pursuant to the Plan shall be reduced to 500,000, subject to adjustment
from time to time by (i) a vote of stockholders or (ii) otherwise pursuant to
paragraph 13. Any such shares may be issued as ISOs, Warrants, Non-Qualified
Options or Awards, or to persons or entities making Purchases, so long as the
number of shares so issued does not exceed such number, as adjusted or amended.
If any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Company shall reacquire any unvested
shares issued pursuant to Awards or Purchases, the unpurchased shares subject to
such Options and any unvested shares so reacquired by the Company shall again be
available for grants of Stock Rights under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
any time after March 10, 1997, and prior to March 9, 2007. The date of grant of
a Stock Right under the Plan will be the date specified by the Compensation
Committee at the time it grants the Stock
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Bitstream Inc.
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Right; provided, however, that such date shall not fall prior to the date on
which the Compensation Committee acts to approve the grant. The Compensation
Committee shall enjoy the right, with the consent of the optionee, to convert an
ISO granted under the Plan to a Non-Qualified Option pursuant to paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR WARRANTS OR NON-QUALIFIED OPTIONS. The exercise price per
share specified in the agreement relating to each Warrant or Non-Qualified
Option granted under the Plan shall be as determined by the Board or the
Compensation Committee.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant.
C. $100,000 ANNUAL LIMITATION FOR ISOS. Each eligible employee may be
granted ISOs only to the extent that, in the aggregate under this Plan and
all incentive stock option plans of the Company and any Related
Corporation, such ISOs do not become exercisable for the first time by such
employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the ISOs were granted) of Common Stock in that year. Any options
granted to an employee in excess of such amount will be granted as Warrants
or Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior
to the date such Option is granted and shall mean
(i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which
the Common stock is traded, if the Common Stock is then traded on a
national securities exchange; or
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Bitstream Inc.
1997 Stock Plan
(ii) the last reported sale price (on that date) of the Common
Stock on the NASDAQ National Market List, if the Common Stock is not
then traded on a national securities exchange; or
(iii) the average of the closing bid and asked prices last quoted
(on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on
the NASDAQ National Market List.
However, if the Common Stock is not publicly traded at the time that an
Option is granted under the Plan, "fair market value" shall be deemed the
fair value of the Common Stock as determined by the Board or Compensation
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of
the Common Stock in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or cancellation as provided in paragraph 16, each Option
shall expire on the date specified by the Board or Compensation Committee, but
not more than ten (10) years from the date of grant.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. FULL VESTING OR PARTIAL VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable thereafter in
such installments as the Board or Compensation Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Board or Compensation
Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Board or Compensation Committee shall
have the right to accelerate the date of exercise of any installment of any
Option; provided that the Board or Compensation Committee shall not
accelerate the exercise date of any installment of any Option granted to
any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
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Bitstream Inc.
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E. EMPLOYEES OWNING GREATER THAN TEN PERCENT OF VOTING STOCK. Any ISO
granted to an employee owning stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company
or any Related Corporation shall not be exercisable after the expiration of
five years from the date of grant.
9. EMPLOYMENT.
A. TERMINATION OF EMPLOYMENT. IF an ISO optionee ceases to be employed
by the Company and all Related Corporations other than by reason of death
or disability as defined in paragraph 10, no further installments of his
ISOs shall become exercisable, and his ISOs shall terminate after the
passage of ninety (90) days from the date of termination of his employment,
but in no event later than on their specified expiration dates, except to
the extent that such ISOs (or unexercised installments thereof) have been
converted into Non-Qualified Options pursuant to paragraph 16.
B. LEAVES OF ABSENCE. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service)
provided that the period of such leave does not exceed ninety (90) days or,
if longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written
approval of the Board or Compensation Committee shall not be considered an
interruption of employment under the Plan, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved period of
absence.
C. CHANGES OF EMPLOYMENT. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and
Related Corporations, so long as the optionee continues to be an employee
of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for
any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his death, any ISO of his may be
exercised, to the extent of the number of shares with respect to which he
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the
laws of descent and distribution, at any time prior to the earlier of the
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Bitstream Inc.
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specified expiration date of the ISO or ninety (90) days from the date of
the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his disability, he shall have the
right to exercise any ISO held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he
could have exercised it on that date, at any time prior to the earlier of
the specified expiration date of the ISO or 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will or by the laws of descent and distribution, and during
the lifetime of the grantee each Option shall be exercisable only by him.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Board or
Compensation Committee may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in paragraphs 6 through 11 hereof
and may contain such other provisions as the Board or Compensation Committee
deems advisable which are not inconsistent with the Plan, including restrictions
applicable to shares of Common Stock issuable upon exercise of Options. In
granting any Warrant or Non-Qualified Option, the Board or Compensation
Committee may specify that such Warrant or Non-Qualified Option shall fall
subject to the restrictions set forth herein with respect to ISOs, or to such
other termination and cancellation provisions as the Board or Compensation
Committee may determine. The Board or Compensation Committee may from time to
time confer authority and responsibility on one or more of its own members and/
or one or more officers of the Company to execute and deliver such instruments.
The proper officers of the Company are authorized and directed to take any and
all action necessary or advisable from time to time to carry out the terms of
such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. 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, then, in each such case, the
optionee, on exercise of such Option at any time after
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Bitstream Inc.
1997 Stock Plan
the issuance or effective date of such dividend or split, as the case may
be, shall receive, in lieu of the Common Stock issuable upon such exercise
prior to such issuance or effective date, the stock and other securities
and property (including cash) to which such holder would have been entitled
upon such issuance or effective date, if such holder had exercised Options
granted hereunder immediately prior thereto.
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"),
unless the Board shall otherwise determine by resolution adopted at least
ten (10) days prior to the closing of the Acquisition, all outstanding
Stock Rights shall become fully vested and exercisable as of the closing of
the Acquisition. In addition, the Board or Compensation Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board") may take one or more of the following
actions:
(i) make appropriate provision for the continuation of such Stock
Rights by substituting on an equitable basis for the shares then
subject to such Stock Rights the consideration payable with respect to
the outstanding shares of Common Stock in connection with the
Acquisition; or
(ii) make appropriate provision for the continuation of such
Stock Rights by substituting on an equitable basis for the shares then
subject to such Stock Rights any equity securities of the successor
corporation; or
(iii) upon written notice to the holders of the Stock Rights,
provide that all Stock Rights must be exercised, to the extent then
exercisable, within a specified number of days of the date of such
notice, at the end of which period the Stock Rights shall terminate;
or
(iv) terminate all Stock Rights in exchange for a cash payment
equal to the excess of the fair market value of the shares subject to
such Stock Rights (to the extent then exercisable) over the exercise
price thereof; or
(v) terminate all Stock Rights in exchange for the right to
participate in any stock option or other employee benefit plan of any
successor corporation.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in paragraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares
of Common Stock, upon exercising a Stock Right, the
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Bitstream Inc.
1997 Stock Plan
holder thereof shall be entitled to receive for the purchase price paid
upon such exercise the securities he would have received if he had
exercised his Stock Right prior to such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to
ISOs shall be made only after the Board or Compensation Committee,
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 of the Code) or would cause any adverse
tax con sequences for the holders of such ISOs. If the Board or
Compensation Committee determines that such adjustments made with
respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at
such other time and subject to such other conditions as shall be
determined by the Board or Compensation Committee.
F. 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. No adjustments
shall be made for dividends paid in cash or in property other than
securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under
the Plan and the optionee shall receive from the Company cash in lieu
of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the foregoing events
described in subparagraphs A, B or C above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to
Stock Rights which previously have been or subsequently may be granted
under the Plan shall also be appropriately adjusted to reflect the
events described in such subparagraphs. The Board or Compensation
Committee or a Successor Board shall determine the specific
adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive. If any person or
entity owning restricted Common Stock obtained by exercise of a Stock
Right made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs A,
B or C above as a result of owning such restricted Common Stock, such
shares or securities or cash shall be subject to all of the conditions
and restrictions applicable to the restricted Common Stock with
respect to which such shares
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Bitstream Inc.
1997 Stock Plan
or securities or cash were issued, unless otherwise determined by the
Board or Compensation Committee or a Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTs. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either
A. In United States dollars in cash or by check;
B. At the discretion of the Board or Compensation Committee, 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 Stock Right;
C. At the discretion of the Board or Compensation Committee, by
delivery of the grantee's personal recourse note bearing interest payable
not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, or
D. At the discretion of the Board or Compensation Committee, by any
combination of A, B or C above.
If the Board or Compensation Committee permits payment by means of the methods
set forth in clauses B, C, or D of the preceding sentence, such permission shall
be expressed in writing at the time of the grant of the ISO in question. The
holder of a Stock Right shall not have the rights of a shareholder with respect
to the shares covered until the date of issuance of a stock certificate to him
for such shares. Except as expressly provided above in paragraph 13 with respect
to changes in capitalization and stock dividends, no adjustment shall be made
for dividends or similar rights for which the record date falls prior to the
date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
March 10, 1997, subject (with respect to the validation of ISOs granted under
the Plan only) to approval of the Plan by the stockholders of the Company at a
subsequent Meeting of Stockholders or, in lieu thereof, by unanimous written
consent. If the stockholders do not provide their approval by February 28, 1998,
any grants of ISOs under the Plan made prior to that date will be rescinded. The
Plan shall expire on March 9, 2007 (except as to Options outstanding on that
date). Subject to the provisions of paragraph 5 above, Stock Rights may be
granted under the Plan prior to the date of stockholder approval of the Plan.
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Bitstream Inc.
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The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, (i) the Board may
not, without the approval of the stockholders of the Company obtained in the
manner stated in this Section 15, increase the maximum number of shares for
which Options may be granted or change the designation of the class of persons
eligible to receive Options under the Plan, and (ii) any such modification or
amendment of the Plan shall be approved by a majority of the stockholders of the
Company to the extent that such stockholder approval is necessary to comply with
applicable provisions of the Code, rules promulgated pursuant to Section 16 of
the Exchange Act, applicable state law, or applicable NASD or exchange listing
requirements. Termination or any modification or amendment of the Plan shall
not, without the consent of an optionee, affect his or her rights under an
Option theretofore granted to him or her.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; CANCELLATION OF ISOS.
The Board or Compensation Committee, at the written request of any optionee, may
in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
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
optionee serves as an employee of the Company or a Related Corporation 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 Board or
Compensation Committee (with the consent of the Optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the Board
or Compensation Committee 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 optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Board or Compensation Committee takes appropriate action. The Board or
Compensation Committee, with the consent of the optionee, also may cancel any
portion of any ISO that has not been exercised at the time of such cancellation.
17. APPLICATION OF FUNDS. the proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENT REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan shall fall subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Warrant
or Non-Qualified Option, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph
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Bitstream Inc.
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20) or the vesting of restricted Common Stock acquired on the exercise of a
Stock Right hereunder, the Company, in accordance with Section 3402(a) of the
Code, may require the optionee, Award recipient or purchaser to pay additional
withholding taxes in respect of the amount that is considered compensation
includible in such person's gross income. The Board or Compensation Committee in
its discretion may condition
A. the exercise of an option,
B. the grant of an Award,
C. the making of a Purchase of Common Stock for less than its fair
market value, or
D. the vesting of restricted Common Stock acquired by exercising a
Stock Right,
on the grantee's payment of such additional withholding taxes.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition means any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before he sells such stock, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter. If an
optionee is a person subject to Section 16(b) of the Exchange Act, delivery of
any withholding and employment taxes due may be deferred until ten (10) days
after the date any income on the disposition is recognized under Section 83 of
the Code. The Company may cause a legend to be affixed to certificates
representing shares of Common Stock issued upon exercise of incentive stock
options to ensure that the Board receives notice of a Disqualifying Disposition.
21. RESTRICTIONS ON EXERCISE OF OPTIONS AND ISSUANCE OF SHARES.
A. Notwithstanding anything in this Plan to the contrary, an Option
cannot be exercised, and the Company may delay the issuance of shares
covered by the exercise of an Option and the delivery of a certificate for
such shares, until one of the following conditions shall be satisfied:
13
<PAGE> 33
(i) the shares with respect to which such Option has been
exercised are at the time of the issuance of such shares effectively
registered or qualified under applicable Federal and state securities
acts now in force or as hereafter amended; or
(ii) counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that the
issuance of such shares is exempt from registration and qualification
under applicable Federal and state securities acts now in force or as
hereafter amended.
B. The Company shall be under no obligation to qualify shares or to
cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purpose of covering the
issuance of shares in respect of which any Option may be exercised or to
cause the issuance of such shares to be exempt from registration and
qualification under applicable Federal and state securities acts now in
force or as hereinafter amended, except as otherwise agreed to by the
Company in writing in its sole discretion.
22. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.
Unless and until the shares to be issued upon exercise of an Option granted
under the Plan have been effectively registered under the Securities Act of
1933, as amended (the "1933 Act"), as now in force or hereafter amended, the
Company shall be under no obligation to issue any shares covered by any Option
unless the person who exercises such Option, in whole or in part, shall give a
written representation and undertaking to the Company which is satisfactory in
form and scope to counsel for the Company and upon which, in the opinion of such
counsel, the Company may reasonably rely, that he or she is acquiring the shares
issued pursuant to such exercise of the Option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the 1933 Act, or any other applicable law, and that if
shares are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an Option shall have been exercised, or to qualify any
such shares for exemption from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each optionee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus, offering circular or
any other document that is reasonably necessary for such purpose and may require
reasonable indemnity to the Company and its officers and directors from such
holder against all losses, claims, damages and liabilities arising from such use
of the information so furnished and caused by any untrue
14
<PAGE> 34
Bitstream Inc.
1997 Stock Plan
statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made.
23. DUTIES OF THE COMPANY. The Company shall at all times keep available
for issuance or delivery such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.
24. NOTICES. Any communication or notice required or permitted to be given
under the Plan shall be in writing, and mailed by registered or certified mail
or delivered by hand, if to the Company, to the attention of the President at
the Company's principal place of business; and, if to an optionee, to his or her
address as it appears on the records of the Company.
25. GOVERNING LAW -- CONSTRUCTION. The validity and construction of the
Plan and the instruments evidencing Stock Rights shall be governed by the laws
of Delaware or the laws of any jurisdiction in which the Company or its
successors in interest may be organized from time to time. In construing this
Plan, the singular shall include the plural and the masculine gender shall
include the feminine and neuter, unless the context otherwise requires.
15
<PAGE> 35
Exhibit 8A
BITSTREAM INC.
INCENTIVE STOCK OPTION AGREEMENT
Under 1997 Stock Plan
IN CONSIDERATION FOR the waiver of any and all pre-existing options to
acquire its stock, Bitstream Inc., a Delaware business corporation (the
"Company"), hereby grants this ____ day of 199_ (the "Option Date") to
<first name> <last name> ("Employee"), an option to purchase a maximum of <no.
shs> shares (the "Option Shares") of Class A Common Stock, $.01 par value (the
"Common Stock"), at the price of $.__ per share, on the following terms and
conditions:
1. GRANT UNDER 1997 STOCK PLAN. This Option is granted pursuant to and is
governed by the Company's 1997 Stock Plan (the "Plan") and, unless the context
otherwise requires, terms used herein shall have the same meaning as in the
Plan. The Plan under which this option is granted was approved by the Company's
directors on May 1, 1997 and by the stockholders on _______________________.
2. EXTENT OF OPTION IF EMPLOYMENT CONTINUES. On the following dates, the
Optionee may exercise this Option for the number of Option Shares set opposite
the applicable date so long as Employee continues to be employed by the Company
or any Related Corporation:
<TABLE>
<CAPTION>
<S> <C>
Less than one year from [ISSUE DATE] -0- Option Shares
One year or more, but less than two years % of the total Option Shares
from [ISSUE DATE]
Two years or more, but less than three years an additional __% of the total Option Shares
from [ISSUE DATE]
Three years or more, but less than four from an additional __% of the total Option Shares
[ISSUE DATE]
Four years or more, but less than five from an additional __% of the total Option Shares
[ISSUE DATE]
Five years or more, but less than six years an additional __% of the total Option Shares
from [ISSUE DATE]
</TABLE>
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<PAGE> 36
The foregoing rights shall cumulate while the Optionee continues in the
employment of the Company, or any Related Corporation, and may be exercised up
to and including the date that falls ten (10) years from the Option Date. All of
the foregoing rights are subject to Sections 3 and 4, as appropriate, if
Employee ceases to be employed by the Company or a Related Corporation, or dies
or becomes disabled while in the employ of the Company or a Related Corporation.
3. TERMINATION OF EMPLOYMENT. If Employee ceases to be employed by the
Company or an Related Corporation, other than by reason of death or disability
as defined in Section 4, no further installments of this Option shall become
exercisable and this Option shall terminate ninety (90) days after the date the
Employment ceases, but in no event later than the scheduled expiration date. In
such an event, Employee may only exercise this Option for the number of Option
Shares which have vested and become exercisable prior to the date of
termination, and this Option may only be exercised with respect to such number
of Option Shares which have become exercisable prior to termination at any time
prior to the end of the period of ninety (90) days after the date the employment
ceases, but not later than the scheduled expiration date.
4. DEATH; DISABILITY. If Employee is a natural person who dies while in the
employ of the Company or any Related Corporation, this Option may be exercised,
to the extent of the number of option Shares with respect to which Employee
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary to whom this option has been assigned pursuant to
Section 9, at any time within ninety (90) days after the date of death, but no
later than the scheduled expiration date. If Employee is terminated by reason of
his disability (as defined in the Plan), this option may be exercised, to the
extent of the number of option Shares with respect to which Employee could have
exercised it on the date the employment was terminated, at any time within one
hundred and eighty (180) days after the date of such termination, but not later
than the scheduled expiration date. At the expiration of such one hundred and
eighty (180) day period or the scheduled expiration date, whichever is the
earlier, this Option shall terminate and the only rights hereunder shall be
those as to which the Option was properly exercised before such termination.
5. PARTIAL EXERCISE. Exercise of this Option up to the extent above stated
may be made in part at any time and from time to time within the above limits,
except that this Option may not be exercised for a fraction of a share unless
such exercise is with respect to the final installment of Option Shares subject
to this Option and a fractional share (or cash in lieu thereof) must be issued
to permit Employee to exercise completely such final installment. Any fractional
share with respect to which an installment of this Option cannot be exercised
because of the limitation contained in the preceding sentence shall remain
subject to this Option and available for later purchase by Employee in
accordance with the terms hereof.
6. PAYMENT OF PRICE. The Option price shall be in United States dollars and
may be paid as follows:
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<PAGE> 37
a) in cash or by check, or any combination of the foregoing, equal in
amount to the Option price; or
b) in the discretion of the Board, in cash, by check, by delivery of
shares of the Company's Common Stock having a fair market value (as
determined by the Board) equal as of the date of exercise to the Option
price, or by any combination of the forego ing, equal in amount to the
Option price.
7. AGREEMENT TO PURCHASE FOR INVESTMENT. By acceptance of this Option,
Employee agrees that a purchase of Option Shares under this Option will not be
made with a view to their distribution, as that term is used in the 1933 Act
unless in the opinion of counsel to the Company such distribution is in
compliance with or exempt from the registration and prospectus requirements of
the 1933 Act and applicable state securities laws, and Employee agrees to sign a
certificate to such effect at the time of exercising this Option and agrees that
the certificate for the Option Shares so purchased may be inscribed with a
legend to ensure compliance with the 1933 Act and applicable state securities
laws.
In the event that for any reason the Option Shares to be issued upon exercise of
the Option shall not be effectively registered under the 1933 Act, upon any date
on which the Option is exercised in whole or in part, the person exercising the
Option shall give a written representation to the Company in the form reasonably
required by the Company and the Company shall place an "investment legend,"
so-called, upon any certificate for the Shares issued by reason of such
exercise.
8. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of this
Agreement, this Option may be exercised by written notice to the Company, at the
principal executive office of the Company, or to such transfer agent as the
Company shall designate. Such notice shall state the election to exercise this
Option and the number of Option Shares in respect of which it is being exercised
and shall be signed by the person or persons so exercising this Option. Such
notice shall be accompanied by payment of the full purchase price of such Option
Shares, and the Company shall deliver a certificate or certificates representing
such Option Shares as soon as practicable after the notice shall be received.
The certificate or certificates for the Option Shares as to which this Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising this Option (or, if this Option shall be exercised by
Employee and if Employee shall so request in the notice exercising this Option,
shall be registered in the name of Employee and another person jointly, with
right of survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising this Option. In the event this
Option shall be exercised, pursuant to Section 4 hereof, by any person or
persons other than Employee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise this Option. All Option
Shares that shall be purchased upon the exercise of this Option as provided
herein shall be fully paid and nonassessable.
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<PAGE> 38
9. OPTION NOT TRANSFERABLE. This Option is not transferable or assignable
except by will or by the laws of descent and distribution. During the Optionee's
lifetime only Employee can exercise this Option.
10. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
Option imposes no obligation on Employee to exercise it.
11. NO OBLIGATION TO CONTINUE EMPLOYMENT. Neither the Plan nor this Option
shall obligate the Company or any Related Corporations in any manner to continue
Employee in his employment.
12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. Employee shall enjoy no rights
as a stockholder with respect to Option Shares subject to this Agreement until a
stock certificate therefor has been issued to Employee and it is fully paid for
by Employee. Except as expressly provided in the Plan for changes in the
capitalization of the Company, no adjustment shall be made for dividends or
similar rights for which the record date precedes the date upon which such stock
certificate is issued.
13. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. This Option is intended to
encourage Employee to work for the best interests of the Company and its
stockholders. To protect Employee's interest in this Option, the provisions of
the Plan that preserve options at full value in a number of contingencies are
hereby made applicable hereunder and are incorporated herein by reference. Thus,
this Option and the Option price shall be equitably adjusted in the event of any
stock dividend, stock split, recapitalization or other change in the capital
structure of the Company. In lieu of issuing fractional shares upon exercise
thereof, this Option (and the corresponding Option Shares) shall be rounded
upward or downward to the nearest whole share (rounding upward for all amounts
equal to or in excess of .51). In particular, without affecting the generality
of the foregoing, it is understood that for the purposes of Sections 2 through 4
hereof, inclusive, maintaining or being in the employ of the Company includes
maintaining or being in the employ of a Related Corporation.
14. DISQUALIFYING DISPOSITION. Employee agrees to notify the Company in
writing immediately after Employee makes a Disqualifying Disposition of any
Option Shares received pursuant to the exercise of this Option. A Disqualifying
Disposition is any disposition (including any sale) of such Option Shares before
the later of (a) two years after the date Employee was granted this Option, or
(b) one year after the date Employee acquired Option Shares by exercising this
Option. If Employee has died before such Option Shares are sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter. Employee also agrees to provide the Company with any information
which it shall request concerning any such disposition. Employee acknowledges
that he or she will forfeit the favorable income tax treatment otherwise
available with respect to the exercise of an incentive so if he or she makes a
Disqualifying Disposition of the Option Shares received on exercise of the
Option.
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<PAGE> 39
15. WITHHOLDING TAXES. If the Company determines in its discretion that it
is obligated to withhold tax with respect to a Disqualifying Disposition (as
defined in the preceding Section) of Option Shares received by the Employee on
exercise of this Option, Employee hereby agrees that the Company may withhold
from Employee's wages or other remuneration the appropriate amount of federal,
state and local withholding taxes attributable to such Disqualifying
Disposition. If any portion of this Option is treated as a non-qualified option,
Employee hereby agrees that the Company may withhold from Employee's wages the
appropriate amount of federal, state and local withholding taxes attributable to
Employee's exercise of such nonqualified option. At the Company's discretion,
the amount required to be withheld may be withheld in cash from such wages or
other remuneration, or in Common Stock (with respect to compensation income
attributable to the exercise of this Option) from the Common Stock otherwise
deliverable to Employee on exercise of this Option; provided however, no such
withholding may be made by an optionee who is an "officer" or "director" within
the meaning of the Exchange Act, except pursuant to a standing election to so
withhold Common Stock purchased upon exercise of an Option, such election to be
made in the form set forth in Exhibit 1 hereto and to be made not less than six
months prior to the date of such exercise. Such election may be revoked by the
optionee only upon six months prior written notice to the Company. Employee
further agrees that, if the Company does not withhold an amount from Employee's
wages or other remuneration sufficient to satisfy the Company's withholding
obligation, Employee will reimburse the Company on de mand, in cash, for the
amount underwithheld.
16. NO EXERCISE OF OPTION IF EMPLOYMENT TERMINATED FOR MISCONDUCT. If the
employment of Employee is terminated for "Misconduct," this Option shall
terminate on the date of such termination and this Option shall thereupon not be
exercisable to any extent whatsoever. "Misconduct" is conduct, as determined by
the Board, involving one or more of the following: (i) disloyalty, gross
negligence, dishonesty or breach of fiduciary duty to the Company or a Related
Corporation; or (ii) the commission of an act of embezzlement, fraud or
deliberate disregard of the rules or policies of the Company or a Related
Corporation which results in loss, damage or injury to the Company or a Related
Corporation; or (iii) the unauthorized disclosure of any trade secret or
confidential information of the Company or a Related Corporation; or (iv) the
commission of an act which constitutes unfair competition with the Company or a
Related Corporation or which induces any customer of the Company or a Related
Corporation to break a contract with the Company or a Related Corporation; or
(v) the substantial and continuing failure of Employee to render services to the
Company or a Related Corporation in accordance with his assigned duties. For
purposes of this Section, termination of employment shall be deemed to occur
when Employee receives notice that his employment is terminated.
17. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware.
-5-
<PAGE> 40
IN WITNESS WHEREOF the Company and Employee have caused this instrument to
be executed, and Employee whose signature appears below acknowledges receipt of
a copy of the Plan and acceptance of an original copy of this Agreement.
Signature of Employee: BITSTREAM INC.:
_______________________________ By: _________________________
<first name> <last name> Name:
Title: President
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<PAGE> 41
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that, whenever the
undersigned exercises a stock option (including any options which now or may
hereafter be granted), the Company shall withhold from the shares issuable upon
such exercise, such number of shares as is equal in value to the federal and
state withholding taxes due upon such exercise. The undersigned further
acknowledges and agrees that this election may not be revoked without six months
prior written notice to the Company.
Optionee
______________________________________
Signature
Name:_________________________________
(Printed)
______________________________________
Social Security
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<PAGE> 42
Exhibit 8B
NEITHER THIS WARRANT NOR THE SHARES OF CLASS A COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT HAS BEEN ACQUIRED FOR
INVESTMENT AND CANNOT BE SOLD, TRANSFERRED, OR HYPOTHECATED UNLESS AND
UNTIL A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
TRANSFER OR UNLESS AND UNTIL THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.
Right to Purchase <<NO.SHS.>> Shares of Class A Common Stock
Warrant No. BB-<<WNT. NO.>>
BITSTREAM INC.
CLASS A COMMON STOCK PURCHASE WARRANT
BITSTREAM INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received, <<first names>> <<last name>> (the "Purchaser"), or
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time on or after [ISSUE DATE (MUST BE AFTER
________)] and before 5:00 p.m., Delaware time, [ISSUE DATE + 10 YEARS], UP TO
<<NO.SHS.>> fully paid and nonassessable shares of the Company's Class A Common
Stock at the purchase price per share of [PRICE] (such purchase price per share
as adjusted from time to time as herein provided is referred to herein as the
"Exercise Price"). The number and character of such shares of Class A Common
Stock and the Exercise Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) "Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
(b) "Class A Common Stock" shall mean the Company's Class A Common
Stock, par value $.01 per share.
<PAGE> 43
(c) "Person" shall mean any individual, corporation, partnership,
trust or unincorporated organization, or any government or any agency or
political subdivision thereof.
1. Exercise of Warrant. This Warrant may be exercised in full or in part by
the holder hereof by surrender of this Warrant, with the form of subscription
attached as Annex A hereto duly executed by such holder, to the Company at its
principal office, accompanied by payment, in cash or by certified or official
bank check payable to the order of the Company, of the purchase price of the
shares of Class A Common Stock to be purchased hereunder. For any partial
exercise, the holder shall designate in the subscription the number of shares of
Class A Common Stock (without giving effect to any adjustment therein) that it
wishes to purchase. On any such partial exercise, the Company at its expense
will forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or warrants of like tenor in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Class A Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this Warrant
minus the number of such shares designated by the holder in the subscription.
2. Delivery of Stock Certificates, etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
ten (10) days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares (including fractional shares)
of Class A Common Stock to which such holder shall be entitled upon such
exercise, together with any other stock or securities or property to which such
holder is entitled.
3. Stock Splits, Subdivisions and Combinations. Appropriate adjustment
shall be made in the number of shares of Class A Common Stock subject to this
Warrant and in the number, kind and purchase price for shares covered by this
Warrant, to the extent it is outstanding, to give effect to any stock splits,
subdivisions, combinations, and other similar changes in the capital structure
of the Company after the issuance of this Warrant.
4. Adjustment for Reorganization, Consolidation, Merger, etc. In case the
Company after the date hereof shall (a) effect a capital reorganization, (b)
consolidate with or merge with or into any other person, or (c) transfer all or
substantially all of its assets to any other person under any plan or
arrangement contemplating the dissolution of the Company within twenty-four (24)
months from the date of such transfer, then, in each such case, the holder of
this Warrant, on exercise hereof at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Class A Common
Stock issuable upon such exercise prior to such consummation or such effective
date, the stock and other securities and property (including cash) to which such
holder would have been entitled upon such consummation or in connection with
such dissolution, as the case may be,
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<PAGE> 44
if such holder had exercised this Warrant immediately prior thereto. Upon any
reorganization, consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 4, this Warrant shall continue in full
force and effect and the terms hereof shall be applicable to the shares of stock
and other securities and property receivable on the exercise hereof after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities or property,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company.
5. Notice of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any capital reorganization of the Company or any reclassification
or recapitalization of the capital stock of the Company after the date
hereof, or any transfer of all or substantially all the assets of the
Company to or consolidation or merger of the Company with or into any other
person,
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities,
then, and in each such event, the Company will mail to the holder hereof a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, of any is to be fixed, as of which the holders of record of Class
A Common Stock or other securities shall be entitled to exchange their shares of
Class A Common Stock or other securities for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, or
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least ten (10) days prior to the date therein specified.
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<PAGE> 45
6. Reservation of Shares, etc. The Company will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issuance upon exercise of this Warrant as herein provided, such number of shares
of Class A Common Stock as shall then be issuable upon exercise of this Warrant
in full. The Company covenants that all shares of Class A Common Stock that
shall be issuable upon exercise of this warrant shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
7. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant of like tenor, in the name
of such holder or as such holder (on payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Class A Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
8. Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction of any Warrant, on delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, on surrender and cancellation of
such warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
9. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant is being delivered in the State of Delaware and shall be
construed and enforced in accordance with and governed by its laws. The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof.
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<PAGE> 46
11. Expiration. The right to exercise this Warrant shall expire at 5:00
p.m., Delaware time, [ISSUE DATE + 10 YEARS].
Dated: [ISSUE DATE]
(Corporate Seal) BITSTREAM INC.
By: ______________________________
Name: C. Ray Boelig
Title: President
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<PAGE> 47
BITSTREAM INC. Class A Common Stock Purchase Warrant [Issue Date]
To <<first name>> <<last name>> Annex A
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
TO BITSTREAM INC.
The undersigned holder of the within Warrant hereby irrevocably elects to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder, _______ shares of the Class A Common Stock of Bitstream Inc., and
herewith makes payment of $______________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
__________________ whose address is ________________________.
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the face
of the Warrant or Assignment of Warrant)
Dated: _______________________ ______________________________
(Address)
Signed in the presence of:
______________________________
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<PAGE> 48
BITSTREAM INC. Class A Common Stock Purchase Warrant [Issue Date]
To <<first name>> <<last name>> Annex B
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________ the right represented by the within Warrant
to purchase __________ shares of Class A Common Stock of Bitstream Inc. to which
the within Warrant relates, and appoints ____________________ Attorney to
transfer such right on the books of Bitstream Inc.
with full power of substitution in the premises.
______________________________________________
(Signature must conform in all respects
to name of holder as specified on the face
of the Warrant or Assignment of Warrant)
Dated: ____________________ ______________________________
(Address)
Signed in the presence of:
_________________________________________
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<PAGE> 49
Exhibit 8C
BITSTREAM INC.
Non-Qualified Stock Option Agreement
Under 1996 Stock Plan
Bitstream Inc., a Delaware business corporation (the "Company"), hereby
grants this ___ DAY OF 199_ (the "Option Date") to <<FIRST NAME>> <<LAST NAME>>
("Optionee"), an option to purchase a maximum of <<NO. SHS>> shares (the "Option
Shares") of Class A Common Stock, $.01 par value (the "Common Stock"), at the
price of $____ per share, on the following terms and conditions:
1. GRANT UNDER 1997 STOCK PLAN. This Option is granted pursuant to and is
governed by Company's 1997 Stock Plan approved by Company's directors on March
10, 1997 (the "Plan"). Unless the context requires otherwise, terms used herein
shall have the same meaning as in the Plan.
2. GRANT AS NON-QUALIFIED OPTION, OTHER OPTIONS. This Option is intended to
be a Non-Qualified Option (rather than an incentive stock option), and the Board
intends to take appropriate action, if necessary, to achieve this result. This
Option is in addition to any other options heretofore or hereafter granted to
Optionee by Company, but a duplicate original of this instrument shall not
affect the grant of another option.
3. EXTENT OF OPTION IF BUSINESS RELATIONSHIP CONTINUES. If Optionee has
continued to serve Company or any Related Corporation in the capacity of an
employee, officer, director, agent, advisor, or consultant, including services
as a member of the Board of Advisors of Company or any Related Corporation (such
service is described herein as maintaining or being involved in a "Business
Relationship" with Company or any Related Corporation), on the following dates,
Optionee may exercise this Option for the number of Option Shares set opposite
the applicable date:
<TABLE>
<S> <C>
One year or more, but less than two years % of the total Option Shares
from [ISSUE DATE]
Two years or more, but less than three years an additional __% of the total Option Shares
from [ISSUE DATE]
Three years or more, but less than four years an additional __% of the total Option Shares
from [ISSUE DATE]
</TABLE>
<PAGE> 50
<TABLE>
<S> <C>
Four years or more, but less than five years an additional __% of the total Option Shares
from [ISSUE DATE]
Five years or more, but less than six years an additional __% of the total Option Shares
from [ISSUE DATE]
</TABLE>
The foregoing rights shall cumulate while Optionee continues to maintain a
Business Relationship with Company or any Related Corporation, and may be
exercised up to and including the date that falls ten (10) years from the date
this Option is granted. All of the foregoing rights fall subject to Sections 4
and 5, as appropriate, if Optionee ceases to maintain a Business Relationship
with Company or a Related Corporation, dies, becomes disabled or undergoes
dissolution while involved in a Business Relationship with Company or a Related
Corporation.
4. TERMINATION OF BUSINESS RELATIONSHIp. If Optionee ceases to maintain a
Business Relationship with Company or any Related Corporation, other than by
reason of death or disability as defined in Section 5, no further installments
of this Option shall vest or become exercisable from and after the date Optionee
no longer maintains a Business Relationship with the Company or any Related
Corporation and this option may only be exercised, to the extent of the number
of Option Shares with respect to which Optionee could have exercised it on the
date the Business Relationship ceased, at any time within [Insert Time Period]
after the date Optionee ceased to maintain a Business Relationship with the
Company or any Related Corporation, but in no event later than the scheduled
expiration date. At the expiration of such [Insert Time Period] or the scheduled
expiration date, whichever occurs earlier, this Option shall terminate and the
only rights hereunder shall be those as to which the Option was properly
exercised before such termination.
5. DEATH; DISABILITY. If Optionee is a natural person who dies while
involved in a Business Relationship with Company or any Related Corporation, no
further installments of this Option shall vest or become exercisable from and
after the date of death and this Option may only be exercised, to the extent of
the number of Option Shares with respect to which Optionee could have exercised
it on the date of his death, by his estate, personal representative or
beneficiary to whom this Option has been assigned pursuant to Section 10, at any
time within [Insert Time Period] after the date of death, but not later than the
scheduled expiration date. If Optionee is a natural person whose Business
Relationship with Company and all Related Corporations is terminated by reason
of his disability (as defined in the Plan), no further installments of this
Option shall vest or become exercisable from and after the date such Business
Relationship is terminated due to such disability and this Option may only be
exercised, to the extent of the number of option Shares with respect to which
Optionee could have exercised it on the date the Business Relationship of the
Optionee with the Company and all Related Corporations was terminated, at any
time within [Insert Time Period] after the date of such termination but not
later than the scheduled expiration date. At the expiration of such [Insert Time
Period] or the scheduled expiration date, whichever occurs earlier, this Option
shall terminate and the only rights hereunder shall be those as to which the
Option was properly exercised before such termination.
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<PAGE> 51
6. PARTIAL EXERCISE. Exercise of this Option up to the extent above stated
may be made in part at any time and from time to time within the above limits,
except that this Option may not be exercised for a fraction of a share unless
such exercise is for the final installment of stock subject to this Option and a
fractional share (or cash in lieu thereof) must be issued to permit Optionee to
exercise such final installment completely. Any fractional share for which an
installment of this Option cannot be exercised because of the preceding sentence
shall remain subject to this Option and available for later purchase by Optionee
in accordance with the terms hereof.
7. PAYMENT OF PRICE. The option price shall be payable in United States
dollars and may be paid:
(a) in cash or by check, or any combination of the foregoing, equal in
amount to the option price; or
(b) in the discretion of the Board, in cash, by check, by delivery of
shares of Company's Common Stock having a fair market value (as determined
by the Board) equal as of the date of exercise to the option price, or by
any combination of the foregoing, equal in amount to the option price.
8. AGREEMENT TO PURCHASE FOR INVESTMENT. By acceptance of this Option
Optionee agrees that a purchase of Option Shares under this Option will not be
made with a view to their distribution as that term is used in the 1933 Act
unless in the opinion of counsel to Company such distribution complies with or
stands exempt from the registration and prospectus requirements of the 1933 Act
and applicable state securities laws, and Optionee agrees to sign a certificate
to such effect at the time of exercising this Option and agrees that the
certificate for the Option Shares so purchased may be inscribed with a legend to
ensure compliance with the 1933 Act and applicable state securities laws.
In the event that for any reason the Option Shares to be issued upon exercise of
the Option shall not be effectively registered under the 1933 Act, upon any date
on which the Option is exercised in whole or in part, the person exercising the
Option shall give a written representation to the Company in the form reasonably
required by the Company and the Company shall place an "investment legend,"
so-called, upon any certificate for the Shares issued by reason of such
exercise.
9. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of this
Agreement, this Option may be exercised by written notice to Company, at the
principal executive office of Company, or to such transfer agent as Company
shall designate. Such notice shall state the election to exercise this Option
and the number of Option Shares in respect of which it is being exercised and
shall be signed by the person or persons so exercising this Option. Such notice
shall be accompanied by payment of the full purchase price of such Option
Shares, and Company shall deliver a certificate or certificates representing
such Option Shares as soon as practicable after the
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<PAGE> 52
notice shall be received. The certificate or certificates for the Option Shares
as to which this Op tion shall have been so exercised shall be registered in the
name of the person or persons so exercising this Option (or, if this Option
shall be exercised by Optionee and if Optionee shall so request in the notice
exercising this Option, shall be registered in the name of Optionee and another
person jointly, with right of survivorship) and shall be delivered as provided
above to or upon the written order of the person or persons exercising this
Option. In the event this Option shall be exercised, pursuant to Section 5
hereof, by any person or persons other than Optionee, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise this Option. All Option Shares that shall be purchased upon the
exercise of this Option as provided herein shall be fully paid and
nonassessable.
10. OPTION NOT TRANSFERABLE. This Option shall not be transferred or
assigned except by will or by the laws of descent and distribution. During
Optionee's lifetime only Optionee can exercise this Option.
11. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
Option imposes no obligation on Optionee to exercise it.
12. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the Plan nor
this Option shall obligate Company or any Related Corporation in any manner to
continue to maintain a Business Relationship with Optionee.
13. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. Optionee shall enjoy no rights
as a stockholder with respect to Option Shares subject to this Agreement until a
stock certificate therefor has been issued to Optionee and it is fully paid for
by Optionee. Except as expressly provided in the Plan for changes in the
capitalization of Company, no adjustment shall be made for dividends or similar
rights for which the record date precedes the date upon which such stock
certificate is issued.
14. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. This Option is intended to
encourage Optionee to work for the best interests of Company and its
stockholders. To protect Optionee's interest in this Option, the provisions of
the Plan that preserve options at full value in a number of contingencies are
hereby made applicable hereunder and are incorporated herein by reference. Thus,
this Option and the Option price shall be equitably adjusted in the event of any
stock dividend, stock split, recapitalization or other change in the capital
structure of Company. In the event of any stock dividend, stock split,
recapitalization or other change in the capital structure of Company, this
Option and the Option price shall be equitably adjusted and, in lieu of issuing
fractional shares upon exercise thereof, this Option (and the corresponding
Option Shares) shall be rounded upward or downward to the nearest whole share
(rounding upward for all amounts equal to or in excess of .51). In particular,
without affecting the generality of the foregoing, Optionee understands that for
the purposes of Sections 3 through 5 hereof, inclusive, maintaining or being
involved in a Business Relationship with Company includes maintaining or being
involved in a Business Relationship with a Related Corporation.
-4-
<PAGE> 53
15. WITHHOLDING TAXES. Optionee hereby agrees that Company may withhold
from Optionee's wages or other remuneration the appropriate amount of federal,
state and local taxes attributable to Optionee's exercise of any installment of
this Option. At Company's discretion, the amount required to be withheld may be
withheld in cash from such wages or other remuneration, or in Common Stock from
the Common Stock otherwise deliverable to Optionee on exercise of this Option;
provided however, no such withholding may be made by an optionee who is an
"officer" or "director" within the meaning of the Exchange Act, except pursuant
to a standing election to so withhold Common Stock purchased upon exercise of an
Option, such election to be made in the form set forth in Exhibit 1 hereto and
to be made not less than six months prior to the date of such exercise. Such
election may be revoked by the optionee only upon six months prior written
notice to the Company. Optionee further agrees that, if Company does not
withhold an amount from Optionee's wages or other remuneration sufficient to
satisfy Company's withholding obligation, Optionee will reimburse Company on
demand, in cash, for the amount underwithheld.
16. NO EXERCISE OF OPTION IF EMPLOYMENT TERMINATED FOR MISCONDUCT. If the
employment or engagement of Optionee is terminated for "Misconduct", this Option
shall terminate on the date of such termination and this Option shall thereupon
not be exercisable to any extent whatsoever. "Misconduct" is conduct, as
determined by the Board, involving one or more of the following: (i) disloyalty,
gross negligence, dishonesty or breach of fiduciary duty to Company or any
Related Corporation; or (ii) the commission of an act of embezzlement, fraud or
deliberate disregard of the rules or policies of Company which results in loss,
damage or injury to Company or any Related Corporation; or (iii) the
unauthorized disclosure of any trade secret or confidential information of
Company or any Related Corporation; or (iv) the commission of an act which
constitutes unfair competition with Company or any Related Corporation or which
induces any customer of Company or any Related Corporation to break a contract
with Company or any Related Corporation; or (v) the substantial and continuing
failure of Optionee to render services to Company or any Related Corporation in
accordance with his assigned duties.
17. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware.
-5-
<PAGE> 54
IN WITNESS WHEREOF Company and Optionee have caused this instrument to be
executed, and Optionee whose signature appears below acknowledges receipt of a
copy of the Plan and acceptance of an original copy of this Agreement.
Signature of Optionee: BITSTREAM INC.
___________________________________ By: ________________________
<<first name>> <<last name>> Name:
Title: President
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that, whenever the
undersigned exercises a stock option (including any options which now or may
hereafter be granted), the Company shall withhold from the shares issuable upon
such exercise, such number of shares as is equal in value to the federal and
state withholding taxes due upon such exercise. The undersigned further
acknowledges and agrees that this election may not be revoked without six months
prior written notice to the Company.
Optionee
____________________________________
Signature
Name:_______________________________
(Printed)
____________________________________
Social Security
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<PAGE> 55
DETACH HERE
BITSTREAM INC.
215 First Street, Cambridge, Massachusetts 02142
ANNUAL MEETING OF STOCKHOLDERS -- MAY 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R The undersigned hereby appoints Mr. C. Raymond Boelig and James D. Hart, or
either of them, proxies of the undersigned with full power of substitution,
O to vote all the shares of Class A Common Stock, $0.01 par value ("Class A
Common Stock") of Bitstream Inc. (the "Company") held of record by the
X undersigned on April 10, 1997, at the Company's Annual Meeting of
Stockholders to be held May 28, 1997 and at any adjournment thereof.
Y
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 56
DETACH HERE
Please mark
[X] votes as in
this example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THIS
PROXY WILL BE VOTED "FOR" ITEMS (1) AND (2), AND IN THE PROXIES' DISCRETION
ON ANY OTHER MATTERS COMING BEFORE THE MEETING.
1. Election of Directors
Nominees: George B. Beitzel, C. Raymond Boelig,
Amos Kaminski and David G. Lubrano
FOR WITHHELD
[ ] [ ]
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
[ ] --------------------------------------------- NOTE BELOW
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve and ratify the adoption
of the Company's 1997 Stock Plan. [ ] [ ] [ ]
3. In their discretion, the proxies are
authorized to vote upon such matters as [ ] [ ] [ ]
may properly come before the meeting or
any postponement or adjournment thereof.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all
the said attorneys, agents, proxies, their substitutes or any of them may
lawfully do by virtue hereof.
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE. NO
POSTAGE REQUIRED IF MAILED IN THE UNITED STATES.
Please date this Proxy and sign your name exactly as it appears hereon. When
there is more than one owner, each should sign. When signing as an attorney,
administrator, executor, guardian, or trustee, please add your title as
such. If executed by a corporation, this Proxy should be signed by a duly
authorized officer. If a partnership, please sign in partnership name by
authorized persons.
Signature Date Signature Date
----------------- -------- ----------------- --------
